Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

EARL MOUNTBATTEN OF BURMA

Mr. Speaker: I wish to inform the House that on the occasion of the death of Earl Mountbatten during the recess I sent a telegram of condolence to Her Majesty on behalf of the House, to which Her Majesty was graciously pleased to reply. I also received on 31 August a copy of the resolution passed by the Parliament of New Zealand relating to the same matter.
I believe that the House would wish the text of these messages to be entered in the Journals; and I shall see that that is done.

Oral Answers to Questions — TRADE

Nationalised Industries (Consumer Protection)

Mr. Murphy: asked the Secretary of State for Trade if he is satisfied with consumer protection in the nationalised industries.

The Minister for Consumer Affairs (Mrs. Sally Oppenheim): The effectiveness of the present arrangements for protecting the consumer interest in the nationalised industries is now the subject of long overdue review. I will bring to the House any proposals for improvements after full consultation with my colleagues with responsibilities for the nationalised industries.

Mr. Murphy: I thank my right hon. Friend for that answer. Does she agree that consumers who have to deal with State monopolies have little or no choice on many occasions and therefore need extra protection?

Mrs. Oppenheim: I entirely agree with my hon. Friend that we are dealing with an area where consumers are captive. As my hon. Friend says, they either have no choice or it is limited. That is why in the Competition Bill we are introducing


two important provisions to protect consumers of nationalised industry goods and services and examining consumer protection generally in that area.

Mr. Heffer: As consumer protection is now non-existent in the private sector, is not the need to resuscitate the Price Commission long overdue?

Mrs. Oppenheim: Far from consumer protection being non-existent, consumer power will be fortified by strengthening competition policy.

Mr. Moate: Is my right hon. Friend aware that the inquiry into British Rail's commuter services under the new powers which she announced during the recess is welcome? Will she confirm that consumers will have an opportunity to give evidence to such inquiries?

Mrs. Oppenheim: I am sure that the Monopolies and Mergers Commission will be receptive to any information that comes its way. The process cannot, however, commence until we have Royal Assent to the Competition Bill.

Price Commission (Investigations)

Mr. Brocklebank-Fowler: asked the Secretary of State for Trade what were the price increases under investigation by the Price Commission in May of the current year.

Mrs. Sally Oppenheim: When this Government took office, the Price Commission was investigating price increases proposed for petrol, beer, water, bread, gas and electricity.

Mr. Brocklebank-Fowler: I thank my right hon. Friend for that reply, but is she aware that some of us have noticed that many of these highly emotive prices were frozen just before or during the election? Will she tell the House what has happened in each case since then?

Mrs. Oppenheim: A number of people have noticed the coincidence to which my hon. Friend referred. During the investigations the Commission allowed the full increase in petrol prices, recommended higher increases in gas and electricity prices than those asked for by the industry, sanctioned a 12 per cent. increase in water charges and an increase in the price of bread of 1p for a large loaf and ½p for a small loaf. On beer

prices, the brewers concerned independently volunteered to me that they would be holding their prices for a good deal longer than the Commission requested. From that it can be seen that the only function of the Price Commission was to disguise inflation in the short term.

Mr. Speaker: Order. I appeal to right hon. and hon. Members to ensure that we have short questions and answers on our first day back.

Mr. William Hamilton: Does the Minister accept that the brewers are one of the largest paymasters of the Tory Party? Is that one of the reasons why they are being allowed to increase the price of the working man's pint by 2p or 3p?

Mrs. Oppenheim: For the hon. Gentleman's information, the largest paymasters of the Tory Party are the people who work in the constituencies to raise money. The two brewers concerned in the Price Commission investigation announced that they would not be increasing prices until January.

Mr. Peter Bottomley: Half of the industries reviewed by the Price Commission in May were nationalised. Can my right hon. Friend therefore confirm that nationalising an industry does not protect the consumer against price rises?

Mrs. Oppenheim: My hon. Friend has drawn attention to an important point. It is in areas where the nationalised industries are involved that prices have risen most quickly through lack of competition.

Retail Prices

Mr. Ioan Evans: asked the Secretary of State for Trade when he expects retail prices to return to a single figure rate of inflation.

Mr. Winnick: asked the Secretary of State for Trade whether he is satisfied with the present rate of increase in retail prices.

The Secretary of State for Trade (Mr. John Nott): Inflation was already in double figures and rising when this Government took office. Prices had more than doubled in five years. It will take time to correct the deteriorating situation caused by many years of Socialist incompetence and mismanagement.

Mr. Evans: As the Conservatives fought the last election on the slogan that they would reduce the cost of living, is it not appalling that they should have deliberately taken actions that have led to a doubling of the rate of increase? Their actions are increasing the cost of living rather than reducing it.

Mr. Nott: We made no forecasts at all for inflation when we fought the last election. In fact, our actions were in complete contrast to those of the previous Chancellor of the Exchequer who forecast a rate of inflation of 8·4 per cent. but presided over an increase in the rate to 25 per cent.

Mr. Winnick: Is it not perfectly clear that the Government's fiscal policies are pushing the inflation rate nearer to 20 per cent. so that working and retired people are paying dearly for the rich man's Budget introduced by the Chancellor?

Mr. Nott: It is perfectly clear that with the single exception of the Budget action, which was more than compensated by a reduction in income tax, virtually every price increase that has occurred since the election was already in the pipeline when the previous Government were rejected by the electorate.

Mr. Anthony Grant: Whatever policy is adopted on inflation, will my right hon. Friend undertake that in no circumstances will he revive anything like the previous Government's Price Commission which presided over the largest recorded increase in prices in living history?

Mr. Nott: As the former Secretary of State for Prices and Consumer Protection said, the Price Commission was never intended to be an agency for holding down the retail price index. I believe that the Price Commission led to enormous bureaucracy for British industry and had virtually no impact on prices. There is no question of reviving it.

Mr. Latham: Is it not the case that, after 18 months of the last Labour Government, in August 1975 the rate of inflation in this country was 29·6 per cent?

Mr. Nott: It is true to say that prices rose faster during the period of the last Labour Government than in the whole of our recorded history. The present

Government hope to do rather better than that.

Mr. McNally: The right hon. Gentleman said that the then Opposition made no forecast about inflation before the last election. Is he not aware that in a Tory Party press release the plan to double the rate of VAT was described as "a Labour lie"? These sentiments were repeated in the Daily Mail. Will the right hon. Gentleman now concede that the biggest single factor in price increases has been the decision of the Government to double the rate of VAT? So much for Labour lies.

Mr. Nott: VAT was not doubled.

Mr. John Fraser: Is it not correct to say that the rate of inflation has increased by 60 per cent. over a period of four months and that this is a disconcertingly rapid growth? Perhaps the right hon. Gentleman would do better to tackle rampant inflation than what he calls the disconcertingly high growth of rampant consumerism.

Mr. Nott: May I remind the hon. Member that the former Chancellor actually said in this House that if the earnings outturn in this country was to be 15 per cent.—in fact it is 16½ per cent.—it was inevitable that price increases would be in double figures? He also said that all the gains that the previous Government had made in conquering inflation would be cancelled out as a result. Those were the statements of the hon. Member's own Government.

Mr. Evans: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of those replies, I give notice that I shall seek to raise this matter on the Adjournment at the earliest possible opportunity.

Retail Price Index

Mr. Dewar: asked the Secretary of State for Trade what is his estimate of the level of the retail price index in six months and 12 months time, respectively.

Mr. Heffer: asked the Secretary of State for Trade if he will publish forecasts for the trends in retail and wholesale prices during the next year.

Mr. Nott: My right hon. Friend the Chancellor of the Exchequer will shortly


be publishing an updated forecast for the economy, including the outlook for inflation.

Mr. Dewar: Does the right hon. Gentleman accept that very many ordinary people in this country now see inflation as a runaway train? They have absolutely no faith in monetary policy alone as a means of controlling inflation. Will he accept that, whatever reservations there may have been about the Price Commission, at least it was some evidence of an interest in the problem? There is no such evidence of any interest on Government Benches at the moment.

Mr. Nott: I agree that it is extremely worrying that the inflationary expectations are so high. However, I do not believe that the system of price controls of the Labour Government had any impact on prices at all. May I remind the hon. Gentleman that all that the Price Commission Act ever attempted was to defer price increases for three months. If he is suggesting that that gave confidence to the British public when, in fact, prices doubled during Labour's five years in office, I fail to see his argument.

Mr. Heffer: Does the right hon. Gentleman agree that the VAT increase has deliberately put up prices and that this Government are responsible for that? It is no good his wriggling on that question.

Mr. Nott: Certainly the increase in value added tax has added to the RPI, but I am sure that the hon. Member will recognise that all the indirect increases in the Budget, including VAT, were more than offset by the reduction in personal income tax.

Mr. Adley: Does my right hon. Friend think that those hon. Members opposite who have come here, fresh from the triumphs of Brighton, to try to blame the Government for all our economic evils after they have been in office for such a short time, are either fools for failing to remember that we have had five years of Socialist profligacy from which we are trying to recover, or perhaps knaves for deliberately trying to mislead the people about the Government's attempts to equate national earnings with national income? Which does my right hon. Friend think they are—fools or knaves?

Mr. Alan Clark: They are all worried about reselection.

Mr. Nott: I do not think that hon. Members opposite are either fools or knaves. I think that they have learnt nothing and, as usual, have forgotten everything.

Mr. Speaker: Order. For the sake of the record in future debates, I wish to put on record my ruling that there are no fools or knaves in this House.

Mr. English: Will the Secretary of State explain why he has answered question No. 4 when all he said was that the Chancellor of the Exchequer would give an answer? Does the Secretary of State agree with The Economist, and is he taking action under the Official Secrets Act over the leak about his Permanent Secretary?

Mr. Nott: My Permanent Secretary has been an enormous help to me, as I am sure he was to the previous Minister. I saw the article in The Economist. I can only say that I could not be more delighted to answer questions on prices so that I can explain to the House and to the country our appalling inheritance from the last Government.

United Kingdom—European Community (Trade Balance)

Mr. Dubs: asked the Secretary of State for Trade what is the present imbalance of trade between the United Kingdom and her EEC partners.

The Minister of State, Department of Trade (Mr. Cecil Parkinson): The United Kingdom's published crude trade deficit with the EEC in the third quarter of 1979 was £607 million, on a seasonally adjusted basis. Because of various distortions to the figures so far this year, this is likely to understate the underlying deficit.

Mr. Dubs: Does the Minister agree that if we excluded oil and food the position would be much worse for this country? Can he offer any hope that in the future our trade with the EEC will be in balance?

Mr. Parkinson: I accept the first part of the hon. Member's remarks, but I must point out that our trade with the EEC is the fastest growing part of our trade. Germany is our biggest trading partner.


France is third, the Netherlands fourth, Ireland fifth and Belgium and Luxembourg are sixth. Our main trading partners are now the EEC.

Mr. Alan Clark: Does my hon. Friend agree that it is no use having a very large volume of trade if one is constantly in deficit?

Mr. Parkinson: The answer to improving our balance of payments figures with the EEC is better performance and better productivity, which are our responsibility and not that of our partners.

Inflation

Mr. Roper: asked the Secretary of State for Trade what is the present inflation rate.

Mr. Coleman: asked the Secretary of State for Trade what is the current year-on-year inflation rate for wholesale prices; and by what proportion it has changed since 3 May.

Mr. Hooley: asked the Secretary of State for Trade what is the present annual inflation rate expressed as a percentage of the rate on 3 May.

Mr. Wellbeloved: asked the Secretary of State for Trade by what percentage the rate of inflation has increased on that obtaining on 3 May.

Mr. Arthur Davidson: asked the Secretary of State for Trade what has been the increase in retail and wholesale prices since May.

Mrs. Sally Oppenheim: The retail price index has increased by 8 per cent. since May and by 16·5 per cent. over the last 12 months. Wholesale prices have increased by 17 per cent. for industrial inputs and 14½ per cent. for outputs over the year to September 1979. In May the figures were 9·7 per cent. and 10·4 per cent. respectively. The rise since May has been 5¼ per cent. for inputs and 6¼ per cent. for outputs.

Mr. Speaker: I propose to call first those hon. Members whose questions are being answered.

Mr. Roper: In view of her reply, will the right hon. Lady persuade her right hon. Friends to withdraw the Competition

Bill since the evidence of the last few months shows clearly the need to strengthen the Price Commission rather than to abolish it?

Mrs. Oppenheim: The evidence of the last few months shows nothing of the kind. As the rate of inflation was approximately as high, or even higher, than at present during more than half of the period when the last Labour Government were in office, and since I do not recall the hon. Member for Farnworth (Mr. Roper) asking vehement questions about prices then, I must conclude that his concern about prices is determined by which Government happen to be in power.
I can claim a greater consistency. I was concerned then, as I am now—and even more so since the higher prices which consumers are now having to pay are the direct result of the complete failure of the last Government's policies.

Mr. Coleman: Does the right hon. Lady accept that her reply is a disgrace in the light of her party's stance at the last general election? Is she aware that most people believe that the sweetness of her promises then have turned sour? Will the right hon. Lady resign?

Mrs. Oppenheim: No, Sir. The only thing that I predicted during the last general election campaign was that many price increases in the pipeline would have to come through after the election. I was absolutely specific about those increases. At the time that I made those forecasts, which have proved to be correct, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who knew of the increases, said that there was no prospect of a further inflationary outburst. That is typical of the political dishonesty which characterised the last Labour Government's disastrous prices record.

Mr. Hooley: Is the Minister's indifference to the galloping rise in inflation on all fours with the recent statement by the Secretary of State which expressed contempt for what he called "consumerism"? By that I assume that he meant the interests of consumers. Is it the Government's policy to show contempt for consumers?

Mrs. Oppenheim: The hon. Member is wrong on two counts. First, my right


hon. Friend made no such statement. Secondly, I am not impervious to the present increases in prices. Price increases were not invented on 3 May. A rising inflationary trend was clearly established before we took office. The trend is caused by the excessive growth in the money supply and real earnings at a time of static productivity. We have taken steps through our economic policies to halt the growth of money supply. Halting the growth in earnings depends largely on a responsible acceptance of economic realities.

Mr. Latham: Since the Opposition do not seem to understand, will my right hon. Friend stress again that the Price Commission made no discernible difference to price inflation and that the country is now paying the bill for the incompetence and weakness of the Government led by the present Leader of the Opposition earlier in the year?

Mrs. Oppenheim: My hon. Friend is absolutely right. Nobody can be satisfied with the current rate of inflation. However, it is certain that if the Labour Party had won the election and had attempted to meet even half of the spending commitments in its manifesto, income tax, VAT and prices would be much higher than they are today.

Mr. Stoddart: Does the right hon. Lady remember coming to my constituency when the rate of inflation was in single figures and slamming the then Labour Government? Will she come to Swindon, go round the shopping centres and explain why inflation is double what it was when she last visited Swindon? Perhaps this time she will give me notice that she is coming.

Mrs. Oppenheim: I am most moved by that delightful invitation. I shall be pleased to accept it. I shall, indeed, be in a position to say why, when I last visited the hon. Member's constituency there was single figure inflation. I insisted that it would not last for long and that as soon as the election was over the profligacy of the last Labour Government would have to be paid for. That is exactly what is happening today.

Mr. Adley: Does my right hon. Friend recall that she told the hon. Member for Farnworth (Mr. Roper) that Labour

Members had suddenly appeared on the Opposition Benches for Question Time to ask about prices although we never heard from them when the Labour Government were in office? Could this be because of bullying by the NEC at Brighton? Would it not be helpful and fair to those hon. Members if we kept a league table of how they perform?

Mrs. Oppenheim: I am always grateful to my hon. Friend for his helpful contributions.

Mr. Harry Ewing: Does the Minister agree that her early prices record made a major contribution to her party losing its deposit in the Manchester, Central by-election?

Mrs. Oppenheim: I certainly do not. I shall not accept lectures about rising prices from any Labour Member who supported a Government who more than doubled prices and, moreover, managed to achieve that gruesome record when world commodity prices, exclusive of oil, were rising by less than 2 per cent. a year. The only thing that the Labour Party can teach anyone about prices is how to double them.

Mr. Peter Bottomley: Will my right hon. Friend help Labour Members by reminding them that a Labour Government managed to achieve a VAT rate of 25 per cent. which was 66 per cent. higher than it is at present?

Mrs. Oppenheim: I am sure that the House will have noted that.

Mr. James Callaghan: When does the Minister expect inflation to be down to single figures again?

Mrs. Oppenheim: I am extremely flattered by the presence of the Leader of the Opposition. This Government are not in the business of making wrong forecast after wrong forecast and misleading people over and over again as did so frequently the previous Chancellor of the Exchequer, Mrs. Shirley Williams and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).

Mr. Callaghan: If the right hon. Lady cannot give us a date, can she say whether her party's policy is to reduce inflation to single figures? If so, will that be in the lifetime of this Government?

Mrs. Oppenheim: The right hon. Gentleman's supplementary question would have been more appropriate during exchanges on question No. 3.

Mr. Cormack: Is it not a fact that between 1974 and 1979 even the Oxford University Press edition of "The Story of Moses" more than doubled in price?

Mrs. Oppenheim: My hon. Friend is right. That was among many items which more than doubled in price.

Scotch Whisky (Tariff Barriers)

Mr. Strang: asked the Secretary of State for Trade what action he is taking to secure the removal of tariff barriers which discriminate against Scotch whisky.

Mr. Parkinson: The ratification of the agreements reached in the GATT multilateral trade negotiations will lead to significant reductions in the tariffs on whisky in a number of important overseas markets, particularly in the United States.

Mr. Strang: Will the Government ensure that the achievements of the previous Government will be implemented from 1 January of next year to ensure that there is no more encouragement to the export of bulk-blended whisky rather than bottled whisky to the United States? Furthermore, will the Minister urge the industry to end once and for all the scandal of the export of bulk malts to Japan, which is costing thousands of jobs in Scotland?

Mr. Parkinson: The hon. Gentleman should know that, subject to the satisfactory conclusion of negotiations on one or two small points, the Government intend to work hard to get the MTNs ratified so that they can come into effect on 1 January. I am sure the hon. Gentleman is aware that the export of bulk whisky is a controversial issue. Even the sector working party could not make up its mind about the matter. However, it is clear that any attempt to change the present arrangements would be against our GATT commitments.

Mr. Myles: With the prospect of Greece becoming a member of the EEC, will the Secretary of State press the Greek Government to remove the discriminatory price controls on Scotch whisky in Greece?

Mr. Parkinson: Yes, Sir.

Retail Price Index

Mr. Neubert: asked the Secretary of State for Trade what estimate he has made of the effects on the retail price index of the price increases already in the pipeline at the time when he took office.

Mr. Mates: asked the Secretary of State for Trade what has been the effect on the current retail price index of the price increases which were in the pipeline when he took office.

Mr. John Garrett: asked the Secretary of State for Trade what is his latest estimate of the effect on the retail price index of the June 1979 Budget measures.

Mr. O'Halloran: asked the Secretary of State for Trade by what percentage the increase in value added tax has raised retail prices since the June Budget.

Mr. Nott: With the exception of the switch to VAT, which accounts for 3½ per cent. on the RPI, and other budget changes, which account for a further ½ per cent., all of which have been wholly offset by substantial income tax reductions, virtually every other price increase reflected in the latest RPI was already in the pipeline when the Labour Government was rejected by the electorate in May.

Mr. Neubert: Does not my right hon. Friend agree that his answer exposes the bogus character of the Opposition's protest on prices? Will he confirm that inflation, as an annual rate, has risen each month for the last 12 months and that the rising trend is attributable entirely to the previous Government's policies?

Mr. Nott: Inflation was already in double figures when we became the Government, and factory-gate prices have been rising during the year. Under the previous Administration the value of the pound was halved, unemployment was doubled and the national debt was nearly doubled. One would have imagined that the Leader of the Opposition would have kept in his seat during this Question Time.

Mr. Speaker: I propose to call first those hon. Members whose questions have been answered.

Mr. Joel Barnett: The previous Chancellor of the Exchequer stated that if earnings rose by more than 15 per cent. prices would inevitably rise. Does the right hon. Gentleman agree with that statement?

Mr. Nott: I agree entirely with the former Chancellor's forecast that, where wage increases of 15 per cent. were achieved in the former year, the RPI would increase by 13 per cent. In addition to that, there are the 4 per cent. increases resulting from the Budget changes which, as I have said, have been more than offset by income tax reduction.

Mr. Higgins: Does the Secretary of State agree that it is even more extraordinary that the Leader of the Opposition should have intervened when the present rate of inflation is less than two-thirds of the maximum rate that was achieved under the previous Government? Does he also agree that it is important to stress the way in which the change from direct to indirect taxation both increases incentives and helps the balance of payments because VAT is zero-rated?

Mr. Nott: Certainly that change increases incentives and provides more personal choice. It is worth reminding the House that in the first Budget of the previous Government not only did their increase in indirect taxation add 3¾ per cent. to the RPI but income tax was increased by 3p. In their second Budget they added 2½ per cent. to the RPI and increased income tax by a further 2p. The memory of those actions will not be forgotten by the British people and certainly not by the House.

Mr. Robert Hughes: The Minister has just claimed that all but 4 per cent. of the RPI increase was already in the pipeline by the time his party took office. Therefore, it should be simple for him to forecast when those prices in the pipeline will come out. Will the Minister now tell us when the RPI will stabilise and return to single figures?

Mr. Nott: As I have already said, it will take time—[HON. MEMBERS: "How long?"]—to correct the deterioration that has been caused by five years of Socialist incompetence and mismanagement. I remind the hon. Gentleman that his party was in power, and that is one of the reasons why the country has been

in such a dreadful state, for most of the past 15 years.

Mr. Garel-Jones: Does my right hon. Friend agree that, in the light of comments made by my right hon. and hon. Friends, the best advice that could be given to the Labour Party is contained in the lines of Alexander Pope:
Let such teach others who themselves excel. And censure freely who have written well.

Mr. Nott: I am delighted that a poet has joined my right hon. and hon. Friends. I hope that we shall hear more quotations from Alexander Pope in the future.

Mr. Robert Sheldon: In answering questions about the retail price index, the right hon. Gentleman has not mentioned the tax and prices index once. Is that because he is as contemptuous of it as is the rest of the House?

Mr. Nott: The tax and prices index has risen by 14·1 per cent. according to the last figures and it has been a useful addition to our statistical armoury. [Interruption.] It is fascinating to have a Question Time in which the Leader of the Opposition and two former Treasury Ministers have taken part. In due course, I shall be quoting from articles by former Treasury Ministers in The Guardian and other newspapers. Those articles have been most enlightening for all of us.

Mr. Emery: Does the Secretary of State agree that the party points that the Opposition are trying to score have little relevance outside the House? The message that should be going to the country from both sides of the House is that the only way to get inflation down is by improving productivity and increasing production from the whole of British industry.

Mr. Nott: I agree entirely with my hon. Friend. The key objectives which we have to meet in our economic policies are, first, to bring back a climate of incentive into our society and, secondly, to create room within the total resources generated by the economy for the wealth-creating and investing private sector which produces more jobs and more wealth. That has not been the case in the last five years.

Mr. Clinton Davis: Does the right hon. Gentleman agree that something we might


have heard from him is a little more frankness about his position and that of his right hon. and hon. Friends during the last election? What promises did he make about an increase in VAT during his election campaign?

Mr. Nott: I had a most delightful little campaign in West Cornwall. I enjoyed it very much and, like most of my hon. Friends, I nearly trebled my majority. I do not recall making any forecasts about VAT. My constituents are more interested in other things.

Price Commission

Mr. Canavan: asked the Secretary of State for Trade what discussions he has had with the chairman of the Price Commission following the publication of the Competition Bill.

Mr. Cook: asked the Secretary of State for Trade when last he met the chairman of the Price Commission.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): My right hon. Friend has not met the present chairman, Mr. Leslie Pincott, since he took office on 1 August.

Mr. Canavan: Will the Government reconsider their insane proposal to scrap the Price Commission? It is the only body with any power to control prices, which are now rising at over 16 per cent. If the Government decide to go ahead with that proposal and abandon even the pretence of fighting inflation, will not the Minister be ashamed to remain a member of, probably, the first Government to almost double the rate of inflation in their first six months of office?

Mr. Eyre: The hon. Gentleman ought to have heard enough this afternoon about the appalling record of the Price Commission to make him realise that his question is inappropriate. The Government believe that the best check on price increases is vigorous competition within a framework of strict economic and monetary policies. The Competition Bill, which the House will be debating tomorrow, is an important first step in this direction.

Mr. James Hamilton: Is the hon. Gentleman aware that Scottish and Newcastle Breweries, with a declared profit of £35 million, have increased the price of

beer by 3p a pint? Is he aware that if the Price Commission had been in operation that increase would have had to be referred to it? How can we overcome these difficulties?

Mr. Eyre: I am not aware of the specific circumstances to which the hon. Gentleman has referred, but he will understand that the operation of the Price Commission, with its effect upon company resources, investment and jobs, was very damaging to industry in general and had a harmful effect on confidence in industry. That is why we have moved quickly to abolish the Price Commission and to restore confidence to industry.

Consumer Interests

Mr. Anthony Grant: asked the Secretary of State for Trade if he is satisfied that his Department is kept sufficiently well informed of consumer views.

Mrs. Sally Oppenheim: As I announced recently, I am taking steps to broaden the base from which information is drawn about consumer views and interests.

Mr. Grant: Does my right hon. Friend agree that there has been a plethora of consumer advice from many diverse sources, ranging from the Office of Fair Trading and citizens advice bureaux which are very good, to bodies such as the National Consumers' Council, which is pretty useless, and that the public are beginning to get confused? Will my right hon. Friend consider consolidating all that activity in one body, perhaps a jazzed-up citizens advice bureau?

Mrs. Oppenheim: I am sorry to disappoint my hon. Friend, but that is not something which I am considering at present. However, I am pleased that I have been able to widen the constituency from which I can draw information about consumers by adding to it many hundreds of thousands of consumers in women's institutes and the National Union of Townswomen's Guilds. Labour Members who sneer at those bodies are insulting many of their own constituents. These are commonsense, down-to-earth ladies. I am extremely grateful for their support and help.

Mr. Pavitt: Will the right hon. Lady show a little more compassion in considering the consumer views that are sent


directly to her? Does she recall that I sent to her the case of a small phial needed by cancer sufferers who have a colostomy? She gave me the dusty answer that, although the price had increased by 70 per cent., competition would bring the price down. Is she not aware that in that commodity there is no competition? Will she do her homework a little more effectively?

Mrs. Oppenheim: I remember the hon. Gentleman's letter, but he will be aware that it is not possible for me to intervene in individual cases, however sympathetic I may feel towards them.

Price Commission

Mr. Dorrell: asked the Secretary of State for Trade what has been the overall cost of the Price Commission to the taxpayer since it was first set up.

Mr. Eyre: Up to the end of March 1979, approximately £35 million at out-turn prices.

Mr. Dorrell: Can my hon. Friend tell the House what return the electorate had for its £35 million? Did the Price Commission—contrary to the prediction of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley)—have any effect in reducing the rate of inflation and did it have any other effect on the economy, or was it just an expensive piece of window dressing?

Mr. Eyre: The answers that my hon. Friend has heard this afternoon have illustrated the minimal effect that the policies of the Price Commission had on prices. I have mentioned the damage done to industry as a consequence of those policies.

Mr. Harry Ewing: Why are the Government so scathing in their condemnation of the Price Commission? Is not the Minister aware that there are countless examples of the Price Commission having controlled the price of an article to the distinct advantage of the housewife, whom we are supposed to be protecting? Is he not also aware that there is one outstanding example where the Price Commission, in agreement with an industry, secured a substantial refund for the consumers of that industry?

Mr. Eyre: The hon. Gentleman is a victim of his party's propaganda. The

Price Commission ordered a restriction on prices in only a small minority of cases and the effect of such restrictions was for only a temporary period. The effect was merely temporarily to delay a price increase.

Price Commission

Mr. Bowen Wells: asked the Secretary of State for Trade whether he will make a statement about the effects of the Price Commission on prices and investment over the past two years.

Mr. Parkinson: As my right hon. and hon. Friends have already made clear, we consider that the Price Commission has had a minimal impact on inflation since the enactment of the Price Commission Act 1977. At the same time, the legislation has seriously harmed jobs and investment prospects and imposed unnecessary burdens on industry.

Mr. Wells: Has not management time been expended on the activities of the Price Commission, diverting management from increasing productivity, which is the only way in which we shall get prices down?

Mr. Parkinson: My hon. Friend is right. The Price Commission cost £35 million in direct costs but it also cost hundreds of millions of pounds in wasted management time taken up answering unnecessary queries.

Mr. Ioan Evans: Are not the Government appealing for restraint in wage increases? Did not the submission of price increases to the Price Commission have the effect of restraining those increases? If there is to be a free-for-all in prices, will there not also be a free-for-all in wages?

Mr. Parkinson: The hon. Gentleman is putting forward a very strange argument, which is that the existence of a body which is of no consequence and does nothing to restrain prices should be used as a means of holding down wages. I do not see the sense of that argument.

Mr. Michael Morris: Would it not help the House if the Minister were to place on the record the exact cost to British industry of the Price Commission?

Mr. Parkinson: That would be a most interesting exercise, but I suggest that it


would be as big a waste of time as a great many of the activities of the Price Commission.

Mr. English: Can we get away from sterile and totally unprovable arguments about the Price Commission? Will the Minister answer a slightly different question? When the Price Commission is abolished who will perform its efficiency function? Who will tell companies such as British Oxygen that if they stopped theft they would not need price increases?

Mr. Parkinson: I suggest that the hon. Gentleman attends tomorrow's debate when we shall be concluding the Second Reading of the Competition Bill. Then all will be revealed to him.

European Community (Council of Ministers)

Mr. John Evans: asked the Secretary of State for Trade when he expects next to meet his EEC colleagues.

Mr. Parkinson: Either my right hon. Friend or myself attends meetings of the EEC Foreign Affairs Council when trade matters are discussed, as do our counterparts in most other member States. The next Foreign Affairs Council is 29 October to 30 October, and I will be attending it.

Mr. Evans: When the hon. Gentleman meets his EEC colleagues will he make clear that, because of the enormous imbalance in trade between the EEC and ourselves and because of the huge subsidies that Britain is giving to the other member countries, the British people are increasingly mystified about what benefits they are supposed to be getting from our membership of the Common Market?

Mr. Parkinson: As I pointed out in answer to an earlier question, the EEC is far and away our biggest market. Our trade is growing more quickly with that market than with any other market. The answer to improving our performance inside that market lies in our own hands—through better industrial performance at home.

Mr. Adley: When my hon. Friend goes to Brussels, in whatever capacity, will he take an opportunity to speed up the attempts to harmonise the processes of members of the EEC for dealing with oil pollution at sea?

Mr. Parkinson: I know my hon. Friend's keen and well-informed interest in this subject and I take note of what he has said.

Mr. Speaker: Mr. Peter Jay. [Interruption.] I apologise to everyone. Mr. Douglas Jay.

Mr. Jay: Does the hon. Gentleman think that the common agricultural policy, which the Conservative Party foisted on this country, has helped to keep down prices?

Mr. Parkinson: The right hon. Gentleman knows that his question is a matter more for my right hon. Friend the Minister of Agriculture, Fisheries and Food than for me. However, the Government have made clear that they are not satisfied with the working of the CAP and they seek reforms.

Mr. Wigley: Will the Minister take the opportunity at the meeting to which he referred to press the Government of France about their attitude towards the import of sheep meat and the detrimental effect that their attitude is having on sheep producers in Wales and the United Kingdom generally?

Mr. Parkinson: The hon. Gentleman has identified an important matter. My right hon. Friend the Minister of Agriculture, Fisheries and Food has the support of all his Community colleagues in pressing the French to acknowledge the ruling of the European Court and to do their duty in opening their market to our sheep.

Price Increases (Notification)

Mr. John Fraser: asked the Secretary of State for Trade what information he obtains about individual price increases since the revocation of price increase notifications under the Price Commission Act.

Mrs. Sally Oppenheim: Individual price increases of public concern will, by definition, be known to me.

Mr. Fraser: Is not the abolition of notification part of what the Secretary of State called the abolition of administrative bumf? Is not the truth of the matter that by abolishing both notification and the Price Commission the Government's


policy is a combination of impotence and ignorance?

Mrs. Oppenheim: The effect on the retail price index of the abolition of the Price Commission will be negligible. As only companies with a turnover of £15 million in the manufacturing industry and £12 million in retail trade had to pre-notify price increases, they were not representative of the whole picture. In any case, as the Price Commission, on its own reckoning, was able to intervene in less than 1 per cent, of the pre-notified price increases, the effect on inflation generally was negligible.

Mr. J. Enoch Powell: Can the right hon. Lady explain how the Price Commission managed to do so much damage to industry if it had so little effect?

Mrs. Oppenheim: There is a perfectly simple explanation. The uncertainty created throughout industry was where the damage was done. It was not the price controls themselves but the uncertainty that they caused that undermined business confidence and prevented investment.

Motor Vehicles and Components

Mr. Hal Miller: asked the Secretary of State for Trade what is the balance for the combined values of trade in motor vehicles and components for the first nine months of the current year.

Mr. Nott: Trade figures for motor vehicle manufacturing in the first nine months of 1979 are not yet available. The balance of trade for the first six months shows a deficit of £461 million.

Mr. Miller: Does my right hon. Friend agree that that is a most disturbing development? For the first time there is an adverse balance on the combined products of the industry. Does he further agree that the answer to that situation lies not in import controls but in increased production and new models? Will he therefore consider lending his voice to those who are urging the British Leyland work force to accept the company's plan for new models and increased production, against the advice of their shop stewards?

Mr. Nott: I certainly share my hon. Friend's desire that the arrangements that are being suggested should be viewed favourably

by the British Leyland work force. I do not wish to be drawn further into this question at present because it is clearly in a very delicate position. The deficit on motor vehicles and components is a most worrying development. We had a very substantial surplus in this area of industrial activity only a year or two ago. The turn around is very serious.

Mr. Cryer: Is it not characteristic of our membership of the EEC that we continue to have a deficit in virtually every area of activity? Is not the only solution to regulate our trade by some sort of quota arrangement so that we may make up the deficiencies of private enterprise of the past and invest in our motor industry and components supply industry so that we may effectively compete in world markets? Until that investment is made and until BL is given the green light to go ahead with investment we shall continue to see our motor industry sink in much the same way as our motor cycle industry.

Mr. Nott: It is not clear to me why the hon. Member for Keighley (Mr. Cryer) should imagine that putting up quotas and other controls against imports of goods would make our manufacturers more competitive. I cannot accept that argument. Such a move would also limit the choice of people in this country who want a choice of goods. It would put up the prices of goods in the domestic market. I remind the hon. Gentleman that a third of our gross national product goes into exports—a greater proportion than that of any other major country in the world? How can he imagine that we should continue to export a third of our GNP if we started putting up barriers against other people's exports to us?

Mr. Dykes: Bearing in mind that this country is committed by both philosophy and international agreement to free trade, will my right hon. Friend go further and confirm that the only way in which we can rescue ourselves from our industrial malaise is by increasing our productivity and our exports? Is he aware that 13 French cars are exported to us for every one of our cars exported to France?

Mr. Nott: Over the years successive Governments have looked at every policy option. Some Governments have looked at every gimmick. However, in the last resort the only answer is for there to be


an increase in productivity and output here at home. There is no other solution.

Mr. Park: Does the Secretary of State agree that no Minister of the Crown seems eager to get involved in British Leyland at the moment? Does he accept that there is little point in asking Leyland workers to accept the massive sacrifices proposed by the chairman of the company when the Secretary of State for Industry will give no indication that if they make them they will then get the money?

Mr. Nott: It would be a strange world if people were to advance money for a project before the project existed. Until British Leyland makes up its mind on how it is to go forward in the next few years there is nothing for that company to discuss with my right hon. Friend.

Offshore Oil Spillage

Mr. Adley: asked the Secretary of State for Trade if he is satisfied with the ability of his Department effectively and efficiently to deal with offshore oil spillage; and if he will make a statement.

Mr. Eyre: My Department is structured to make a prompt and effective response to any oil spill which threatens major pollution of our coasts or waters. Whilst I am satisfied with this ability, no Government can guarantee that no oil will come ashore from such a spill.

Mr. Adley: I thank my hon. Friend for that reply which may or may not give satisfaction to those who have heard it. Does he not agree that there is a need to develop alternatives to detergents upon which his Department relies so heavily at present? In this regard will he or one of his colleagues agree to inspect some technology that has been developed by a company in my constituency which manages to lift oil from water and which his colleagues at the Department of the Environment have already inspected and approved?

Mr. Eyre: I appreciate my hon. Friend's constituency interest in this problem and the interest of his constituency companies in trying to solve it. I believe that representatives of those companies met Admiral Stacey this morning. He heads the marine pollution control unit. I hope that these technical points were put to him. My hon. Friend the Under-

Secretary of State for Trade will be very happy to discuss these matters with my hon. Friend.

Furniture

Mr. Scott: asked the Secretary of State for Trade when he expects to lay regulations concerning the safety of furniture from hazards by fire.

Mrs. Sally Oppenheim: I hope to lay a draft of the proposed regulations on the ignitability of upholstered furniture before each House of Parliament by the end of November.

Mr. Scott: Does my right hon. Friend agree that, although we all want to see increased safety in furniture, as elsewhere, cost factors are immensely important, and that if she accepted the advice that she has been proffered by some quarters totally to ban plastics in furnitures the effect on the price of furniture would be astronomical?

Mrs. Oppenheim: My hon. Friend is quite right. Whereas I am absolutely determined to cut down the number of tragedies arising from the type of fire that is characteristic of polyurethane foam, I am advised that it is far more likely to be effective and less expensive to contain the inflammable contents by having a covering or an interlining which has a very low level of ignitability, rather than to ban the foam itself, which would push up the price of furniture considerably.

Oral Answers to Questions — VIETNAMESE REFUGEES

Mr. Shersby: asked the hon. Member for Wokingham, as representing the Church Commissioners, how many homes the Church Commissioners are providing for Vietnamese refugees; and in what locations; and what is their policy for providing further help and advice.

Mr. William van Straubenzee (Second Church Estates Commissioner): The terms of reference of the Commissioners, like those of other charitable bodies, are strictly limited and do not, by statute, extend to the provision of free housing or other services for refugees, however sympathetic individual Commissioners may be.

Mr. Shersby: I am most grateful for the answer given by my hon. Friend. Is


he aware that London church members are pressing local authorities to provide accommodation for the boat people? Will he therefore consult his colleagues, the Church Commissioners, to see whether accommodation can be made available for letting at reasonable rents to the boat people in the London area, thus leading the way and perhaps setting an example to other landlords?

Mr. van Straubenzee: The amount of suitable accommodation available in central London is less than is commonly supposed, and there are very great pressures on it. However, in the light of my hon. Friend's representations I shall gladly have an examination made to see whether any contribution can be made to what I quite understand is a human problem.

CAMBODIA (AID)

Mr. Newens: (by private notice) asked the Lord Privy Seal if he will make a statement on British food aid and other assistance urgently required to relieve the critical famine situation in Cambodia.

The Minister of State, Foreign and Commonwealth Office (Mr. Peter Blaker): Her Majesty's Government announced on 6 October that they had decided to supply rice worth £1 million for distribution in Cambodia; subject to parliamentary approval, to provide the equivalent of a further five million United States dollars for use by international relief agencies in Cambodia; and to provide an RAF Hercules aircraft to carry vehicles from the United Kingdom to be used for food handling and distribution in Cambodia.
The RAF Hercules has been making daily flights between Bangkok and Cambodia since 13 October, carrying vehicles and food. These flights have now been extended until mid-November.

Mr. Newens: Does the Minister accept that, with the prospect of hundreds of thousands of people, perhaps more, dying of starvation during the next few weeks, it would be disgraceful if insistence on continuing to recognise the appalling Pol Pot regime delayed or hampered the arrival of supplies of food and other assistance from this country? Are the Government prepared to increase the amount of money so far allocated for aid? Are they prepared to make part of it available through Oxfam, which has done a magnificent job? Will the hon. Gentleman look into the possibility of providing more transport to get the food where it is needed? In many ways transport is in as desperate short supply as the food itself.

Mr. Blaker: The question of recognition of one side or another in Cambodia has had nothing to do with decisions that the Government have taken about the provision of aid. Those decisions have been taken on humanitarian grounds alone.
As for the amount of aid, I think that we are doing pretty well. We are providing about £4 million-worth of aid. We announced this even before the official appeal by the International Committee of


the Red Cross and the United Nations Children's Fund, and it compares favourably with what other countries have announced.
With regard to Oxfam, no decisions have yet been taken—apart from the provision of the Hercules—about the channel through which our aid will be provided, but I have received a request from Oxfam for some of the aid to be channelled through it. I applaud the action that it is taking.
In speaking of transport, the hon. Gentleman correctly identified what is at present the main problem—logistics. We think that we are doing pretty well with the supply of the Hercules, the provision of which has now been extended for a further period. This has been very much welcomed by those in Cambodia and elsewhere in the area who are responsible for moving the food aid.

Mr. Tapsell: Whilst I fully support the Government's decision on humanitarian grounds, to send food aid to Cambodia, may I ask my hon. Friend whether we or any of our friends have any machinery on the ground to offer some hope that a large part of the aid will in fact go to starving refugees and not to the military forces?

Mr. Blaker: That is one of the problems. It has been in the minds of the various organisations concerned with making sure that the aid actually reaches its destination. The ICRC and UNICEF are now satisfied about that, as is Oxfam. It was very soon after the ICRC and UNICEF announced that they were so satisfied that the Government responded with their offer of aid.

Dame Judith Hart: Whilst I welcome the initial Government response, made with the background of the tremendous public concern and pressure in this country, may I ask the Minister a little more about the distribution and the way in which the aid is being channelled? He said—as we know—that UNICEF and ICRC are to receive some of it, but is not the important thing now—particularly in the light of the discussion by the EEC Foreign Ministers in Dublin this weekend, and what they have said—to use fully the agencies that are able most effectively to channel the aid to the starving people who need it? Does not that mean that

the Minister and the Government should be extremely responsive to the request by Oxfam, which has proved to be a really effective channel?
Can the Minister give an assurance today that he will consider the Oxfam request, which is paralleled by requests by other non-governmental organisations in Europe, to channel a considerable proportion of the British Government aid through it, as the most effective agency at the moment?

Mr. Blaker: I agree with the right hon. Lady that the important thing is to ensure that the aid arrives at the proper destination—the starving people—by all possible means, in as large quantities as possible and as soon as possible. The evidence that I have is that the ICRC and UNICEF operation is now going effectively. They are satisfied that the aid is reaching its destination. They hope by the end of this month to have delivered 10,000 tons of aid and to double that figure next month.
I talked twice with Oxfam—once in Singapore and once in London, last week. I applaud what it is doing. I am following with close attention its efforts to set up an international consortium. As I have said, no decision has yet been taken about the channels through which our aid will go, but I am bearing in mind the Oxfam request. I repeat that it is important that there should be close co-operation between all organisations, whether Oxfam or United Nations organisations.

Dame Judith Hart: May I pursue that matter for a moment? I appreciate what the hon. Gentleman has said, but time is of the essence. It looks as though it may take a little time effectively to organise the channelling of food aid to ICRC and UNICEF. Oxfam is doing it already, but has run out of money. If Oxfam can be provided with extra money quickly, it can get the food in quickly. That does not prejudice what decision might be taken later about the UNICEF-ICRC aid.

Mr. Blaker: One of the main problems at present is the logistics problem. That is why our Hercules aircraft is so important. In general, that is a more important problem than the availability of food.
The ICRC-UNICEF operation is now going fast. It is now taking in more aid than the Oxfam arrangements. That does not mean that I am excluding Oxfam.


When we are making up our minds about the channels through which we shall send our aid, we shall have to take into account a number of factors—for example, the ability of the organisation concerned to mount a sustained and large-scale operation to get the aid in. Another factor is whether the organisation concerned will be sending its aid in to all parts of Cambodia, regardless of the regime under which the starving people may be living.

Mr. Alton: The Minister tried to intimate that the amount of aid that arrives has little to do with which regime is recognised, but the international agencies have themselves suggested that until we dissociate ourselves from the Pol Pot regime, which has been responsible for 2 million deaths in extermination centres, the Heng Samrin regime in Cambodia will not allow the maximum amount of aid to reach the 3 million people who may well die there during the coming 12 months.
Will the Minister ensure that in her discussions with Chairman Hua next week the Prime Minister will place on the agenda as an urgent item the whole question of the dissociation of the Republic of China and the United Kingdom from the Pol Pot regime and the acceptance and recognition of the Heng Samrin regime, which controls 90 per cent, of the country and 90 per cent, of the people in Kampuchea?

Mr. Blaker: I repeat that the issue of which regime in Cambodia the Government recognise has had nothing to do with the Government's decisions on aid, which have been taken solely on humanitarian grounds. Britain still recognises the Pol Pot regime. It was recognised by the previous British Administration. I cannot understand why some seem to be enthusiastic about the Heng Samrin regime. Heng Samrin was a political commissar and a divisional commander under Pol Pot and his regime. However, that is not the issue. My information is that in the areas controlled by the Heng Samrin regime the aid is reaching its destination. That is the important matter.

Mr. Speaker: This is an extension of Question Time. I shall call those hon. Members who have risen and occupants

of the Front Benches before bringing this subject to a conclusion.

Mr. Cook: Does the Minister accept that the previous Government recognised the Pol Pot regime because, for better or worse—in fact, very much for the worse—it was at that time in effective control of Cambodia? What possible excuse is there for persisting in recognising a barbaric regime that now controls only a fragment of the country. If the hon. Gentleman cannot bring himself to recognise the alternative regime, why did he not support the Indian initiative at the United Nations—namely, to withhold recognition from both parties?

Mr. Blaker: The issue is not recognition of one regime or another, but aid. However, the Heng Samrin regime came into Phnom Penh on the back of the Vietnamese Army. If the Vietnamese Army were withdrawn, it may be that it would collapse. The Pol Pot regime is still recognised by many non-aligned countries, including all the ASEAN countries, so we are not alone.

Mr. James Lamond: I leave aside recognition of the Pol Pot regime, as none of us would wish to use starving children as a political gambit. It seems that the Government have moved from their position of three months ago. Three colleagues and myself asked for help to be sent to Kampuchea and it was said that there was no money or food available to give help. The Government have moved from that position to a more tenable one of giving some help. Is the hon. Gentleman's mind still open to increasing that assistance, no matter what aid other countries are giving, instead of smugly suggesting that £4 million compares favourably with the value of aid given by other countries? After all, the British people spend on cigarettes on a Saturday night the sum that we are giving to hundreds of thousands of starving men, women and children in Cambodia.

Mr. Blaker: It is unreasonable to suggest that the Government are being smug. We have done extremely well. Our immediate response with the Hercules aircraft has been much appreciated in the area, as has our offer of £4 million worth of aid. We shall continue to follow the situation as it evolves.

Mr. Cormack: Is my hon. Friend aware that unless Her Majesty's Government have changed the criteria for recognition of a foreign regime it is totally incomprehensible that we should accord official recognition to a barbarous regime that controls such a tiny portion of Cambodia? Can we not withdraw recognition from both odious set-ups?

Mr. Blaker: The Government made it clear that recognition does not imply approval. As my hon. Friend will know, the previous Administration raised the question of the inhuman behaviour of the Pol Pot regime before the United Nations Commission on Human Rights. They were supported by the then Opposition. Recognition has nothing to do with the provision of aid.

Mr. Shore: I think that the whole House will agree that relief should not be made contingent upon recognition of either of the claimant regimes. However, the Minister has put the House in something of a dilemma in understanding the Government's doctrine on recognition. If recognition does not imply approval, and if the Pol Pot regime controls 10 per cent, or less of the territory of Cambodia, how can the hon. Gentleman possibly continue

according recognition to an odious regime?

Mr. Blaker: The policy that the Government are pursuing on recognition is identical with that pursued by the previous Administration, which recognised the Pol Pot regime. The control of territory in Cambodia in May was exactly the same, or more or less the same, as it is now. If the right hon. Gentleman wishes to explore the Government's policy on recognition in general, that is another issue and no doubt he will pursue it.

Mr. Shore: That will not do. When recognition was accorded to the Pol Pot regime, irrespective of the feelings about that Government, it was because it controlled the whole of Cambodia. However, Pol Pot no longer has that control. Therefore, why should the Government continue to accord it recognition?

Mr. Maker: The right hon. Gentleman should know the principles that successive Governments have followed for many years on recognition. We are following those principles precisely. I have stated that the Heng Samrin regime took power on the back of the Vietnamese Army. If that army were withdrawn, the Heng Samrin regime might collapse.

FUEL COSTS (ASSISTANCE)

The Secretary of State for Social Services (Mr. Patrick Jenkin): With permission, Mr. Speaker, I wish to give the House details of the steps that the Government propose to take to help poor families with their fuel bills this winter.
When we came into office we found that no provision had been made by our predecessors in public expenditure plans for any help in the coming winter. So we have given careful consideration to what might be done against the background, on the one hand, of the difficult economic situation and, on the other, of a year in which disposable income from employment and benefits is keeping pace with the overall rise in fuel costs. We recognise that fuel bills can be a real worry for the poorest families, particularly the elderly poor and families with young children.
We therefore propose to concentrate our help this winter on elderly people and families getting supplementary benefit and family income supplement. With the agreement of the Supplementary Benefits Commission, we propose that from 12 November all supplementary benefit householders with a child under 5 and all supplementary pensioner householders who are over 75, or who have a dependant who is over 75, should automatically receive the basic rate of heating addition of 95p a week. Many of the pensioners will already be getting such an addition, but for those who are not, it will mean extra benefit, over a full year, of nearly £50. We estimate that about 110,000 pensioners and about 150,000 beneficiaries with young children will receive this increase. It will not be possible to implement the increase from 12 November but arrears will be paid from that date as adjustments are made.
Second, we wish to give extra help to poor families in work where there are children. Accordingly, we are today laying regulations which, subject to parliamentary approval, will result in all families in receipt of family income supplement getting an additional £1 per week from the uprating due in November, on top of the increases already agreed by the House. Wider coverage is appropriate for FIS because, unlike supplementary benefit, the scheme has no other special

provision for extra help with fuel bills. If approved by the House, the extra £1 each week will benefit about 85,000 working families.
Over the 12 months from November 1979, these proposals will give about £5 million to supplementary pensioners, about £6½ million to those on supplementary benefit with young children, and about £5 million to FIS beneficiaries. Costs falling in the current year will be charged to the Contingency Reserve for 1979–80.
We are living in an era of high-cost energy and we cannot shield the whole population from that even if we wanted to. The Government are, however, aware of the need to take the cost of energy into account in developing their social policies, and we will keep under review the range of help available to assist poor consumers with fuel bills.
The measures that I have announced will concentrate worthwhile help this winter where it is most needed. I feel confident that hon. Members on both sides of the House will welcome them.

Mr. Orme: The Secretary of State for Social Services has again failed to fight his corner in the Cabinet on behalf of those whom he is supposed to represent—the poor, the sick, the elderly and the unemployed. Under his proposals 345,000 families will benefit, as opposed to 5 million families under Labour's previous proposals. The cost of the scheme—£16½ million—is very different from the bill that the previous Government met last winter, of £45 million. The increased electricity charges—18·9 per cent, in June this year—will mean that the average quarterly bill will go up by at least £5. In view of that increase what will happen to elderly persons aged between 65 and 75? What about the pensioners whom we helped over the difficult period? What happens now to the people on rent and rate rebates? I presume that the Minister will tell them not to turn up at the post offices with their books, as there will be no money for them this winter.
What will happen if there is a bad winter, when people will feel rising costs—those rising costs having been deliberately created by the Government to help higher-rate taxpayers? The poor and the sick must meet the costs. Are there


any emergency proposals in case there is a bad winter?
Is the sum of £16½ million, to which the Minister referred, all new money? What will he do about the code of practice? Will he ensure that that is carried out?
The Minister stated that the previous Government made no provision for this winter. Over the past three years the Government made increasing sums available. When he was at the Department of Energy, my right hon. Friend the Member for Bristol, South-East (Mr. Benn) brought forward £35 million. A decision had been taken by the Government to continue the scheme this winter.

Mr. Jenkin: With respect, the right hon. Gentleman is confused about the Government to which he is referring. I understand his points.
The previous Government made no provision in their expenditure plans. As the right hon. Member for Bristol, South-East (Mr. Benn) will recognise, that Government were exceedingly careful to give no commitment in public about continuing their scheme. Therefore, they are hardly able now to criticise what we have done. On the contrary, we are concentrating help on the families where the need is the greatest, and giving worthwhile help to them.
How does the Labour Party seek to defend a scheme that puts £5 into the pockets of school leavers who are on supplementary benefit and living at home? How can it defend a scheme that puts £5 into the pockets of elderly people living in part III accommodation when there is no obligation for them to hand the money over to those paying the bills?
The previous Government's electricity discount scheme was widely criticised, not least by those seeking to defend the interests of the poor. We aim to provide worthwhile help for people in the greatest need.
The amount of £16½ million is new money, which is being found from the Contingency Reserve.
The code of practice is a matter for my right hon. Friend the Secretary of State for Energy. That is being kept under review. It is regarded as an important part of the protection of poor consumers.
As to the question of a bad winter, I said that as a general part of our social policy we would continue to keep under review the question of help with fuel bills for the poor.

Rev. Ian Paisley: The Minister said—

Dr. Owen: On a point of order, Mr. Speaker. It appears from what the Secretary of State said that the electricity discount scheme, which has been in operation since 1976 under the responsibility of the Secretary of State for Energy, is not to continue. No reference was made to this in the statement. Are we to understand that the electricity discount scheme is to be discontinued? Is that the way in which to treat the House?

Mr. Speaker: The right hon. Gentleman knows that that is not a point of order for me. He has managed to jump the queue by asking a question.

Rev. Ian Paisley: Will the Secretary of State say what conversations he has had with his opposite number in Northern Ireland, bearing in mind that the price of gas in Northern Ireland is three times greater than in the rest of the United Kingdom, as we were not given a supply of natural gas? Electricity is more costly in Northern Ireland. What arrangements will be made for the poor, the sick and the unemployed in Northern Ireland?

Mr. Jenkin: My right hon. Friend the Secretary of State for Northern Ireland has been fully associated with all the work that has been done on this subject. The Northern Ireland scheme is not the same as that in the rest of the United Kingdom. It follows the Great Britain measures but in addition provides for a £15 lump sum payment to those on supplementary benefits, family income supplement and housing allowances. The hon. Gentleman rightly gave the reason why there must be a more generous scheme in Northern Ireland. Domestic fuels cost a great deal more in the Province than in Great Britain.

Mr. Benn: Would it not be more honest for the right hon. Gentleman to tell the House that the electricity discount scheme operated over the past three winters, which gave real help to a group of people hard pressed by increasing fuel prices, is being abolished—in a year when


oil prices went up three times, when electricity prices are going up as a result, when the rate of inflation is going up in parallel, and in its place is being substituted a scheme that is worth about a quarter as much, in cash terms? The sum of £45 million, updated for inflation, would be about four times the amount announced today. Is the Minister aware that the Government announced today that they have chosen a group of people, many of whom are locked into all-electric flats and have no alternative fuel supply, who are on rent and rate rebates, and who are to be driven into real poverty and hardship this winter? Is that not a reflection of a state of priorities of which any Government should be absolutely ashamed?

Mr. Jenkin: I defend entirely the priorities in the scheme that I announced, namely, for those over 75 on supplementary benefit and for families on supplementary benefit with children under 5 years of age. That is where the top priority goes.
The right hon. Gentleman would be on stronger ground in criticising what the Government are doing if he had given any indication that money was to be provided under the public expenditure White Paper or if he had given any public commitment to introduce it. As it is, the previous Government did neither. They are not entitled to criticise.

Mr. Benn: Is the right hon. Gentleman aware that on the record over three years running, in each year, never promising for the future, we renewed and expanded the schemes, and that this year it would have been the priority of any Cabinet with human concern not just to continue but to expand the scheme and to prevent people from being driven to destitution by the increase in electricity prices that they must pay this winter? What has been done is a disgrace.

Mr. Brocklebank-Fowler: On a point of order, Mr. Speaker. Does membership of the Front Bench extend to the third row of the Opposition?

Mr. Speaker: Order. It is a matter within my discretion. I know that from time to time hon. Members are irritated when they see that happening on the other side of the House, but it works both ways. If the hon. Gentleman will wait

I am sure that the same will happen on the Government side before Christmas.

Mr. Viggers: Is the Minister aware that when the electricity discount scheme was introduced it was taken up by only 70 per cent, of those eligible, and that the administrative cost was 10 per cent, of the scheme? This means, by simple arithmetic, that only 60 per cent, of the money available was reaching the target. Does he not recognise that this is squandermania, even by the usual Socialist standards, and that his proposals will reach the target of helping those in real need?

Mr. Jenkin: My hon. Friend is quite right. In the first year—the only year for which there were any figures—the take-up of the electricity discount scheme was probably a little over 60 per cent. No one knows what it was later on. The administrative costs of the previous Government's scheme amounted to no less than £4 million. We estimate that the administrative costs of our scheme will be one-tenth of that figure—£400,000.

Mr. Beith: Does the Minister recognise that it would be quite a sensible change of policy to make the benefit system the main vehicle for help with fuel bills, if it were being done on a scale comparable to what has gone before and if the main categories of people who ought to be receiving benefit were all within reach of the scheme?
Does the Minister also realise that unless his Government maintain a much stronger commitment to fuel conservation measures through their housing programmes, there will be many people for whom this benefit will be derisory, because it will not meet the real additional energy costs that they are having to face?

Mr. Jenkin: I am grateful that the hon. Gentleman, as the Liberal spokesman, welcomes the fact that this is seen as a matter of income support and is not designed to enable the Secretary of State for Energy to show himself as a champion of the poor. It is to be seen primarily in a social security context, and that is how the Government are judging it. Questions on home insulation are for my right hon. Friend the Secretary of State for the Environment, but we are maintaining the programmes that we inherited from our predecessors.

Mr. Gordon Wilson: Does the Secretary of State realise that in my part of the world the electricity discount scheme was very well received by many pensioners and others who benefited from it? There will be tremendous anger that it is being dismantled in this summary fashion. Does the Minister accept that there will be discomfort and perhaps even death by hypothermia as the result of lack of adequate finance for electricity costs? The Minister must realise that in certain parts of the country, in a cold winter, this will bite hard into the heating standards of our folk. Is the Minister prepared, and are the Government prepared, to accept the consequences of their skinflint action?

Mr. Jenkin: I do not accept for a moment that this has been decided in a summary fashion. On the contrary, it has been under very careful study by my right hon. Friends and myself over several months. I recognise that there will be disappointment on the part of those who received help in previous years and who will not be helped under this scheme. I do not need to remind the House that we are in a period of very considerable stringency on public spending. We found ourselves with public spending programmes that predicated a rate of economic growth that simply is not there, and have had to cut our coat according to our cloth. The fact that we are making available roughly £17 million to help the families who are in the greatest need is a measure of the Government's concern for the poor.

Several Hon. Members: rose—

Mr. Speaker: Order. I had intended to call those hon. Members who have risen. I will adhere to that and call them. Mr. Emery.

Mr. Emery: Will the Secretary of State make quite clear that the scheme that he is now introducing is automatic and that the help will go automatically to all the people in the categories that he has announced? Will it not be the case that the supplementary benefit officers will still be able, in the categories between the ages of 65 and 75—or in the case of anybody else who would qualify for supplementary benefit—to ensure that people are able to draw the full allowance of 95p a week if there is need for it? Will he agree, there-fore,

that the concept that we are being hard-hearted or casting people out is absolutely incorrect?

Mr. Jenkin: I am extremely grateful to my hon. Friend. He is absolutely right. As I said in my statement, many pensioners are already getting the heating allowance. From next month the rates will be 95p at the lowest level, £1 ·90 at the medium level, and £2 ·85 at the top level. Those are substantial helps for those who need them, whether they are living in houses that are abnormally difficult to heat or for any other reason.

Mr. Tilley: Will the Secretary of State recognise that the major difference between his proposals and those of the Labour Government is in the sphere of the lump-sum payment? Many poor families find it very difficult to meet the electricity bill when it arrives. It is very difficult for them to put money aside out of weekly income. In my constituency and in other areas of inner London, over 25 per cent, of people were receiving help in the form of lump-sum payments. Given that many families on supplementary benefit are left out, as well as many pensioners on supplementary benefit, will the Minister acknowledge that, whatever sort of winter we have, many poor families will either have to do without electricity—and we know, from what is to happen later in the week, that they will no longer be able to afford paraffin—or to face having their electricity cut off at a time when they are in most desperate need of warmth, and fuel for cooking?

Mr. Jenkin: The Government recognise that big winter fuel bills can cause problems for the poorer families. The hon. Gentleman will know that the gas and electricity industries operate a wide range of schemes to help people to spread their bills over the year. We are certainly concerned to see that these schemes are made as widely available as possible. My right hon. Friend the Secretary of State for Energy is encouraging the industries to consider extending the schemes and making new schemes available, because the concentration of bills in the winter quarter can cause considerable difficulties. The hon. Gentleman has made a perfectly clear point, but it is for the fuel industries to help the majority of people to overcome this difficulty.

Mr. Canavan: Is not the Minister aware that an increasing number of families—especially those living in council houses with electrical heating—simply cannot afford to use the heating and that, especially with old people, there is a real risk of hypothermia? Will the Minister therefore reconsider his callous decision to scrap the previous Labour Government's generous fuel discount scheme, or is he trying to surpass his 1974 effor by telling people to brush their teeth in the cold as well as in the dark?

Mr. Jenkin: I do not know whether the hon. Gentleman has recognised that the average payment overall under the last Government's scheme—spread, as it was, across a range of people, some of whom could by no stretch of the imagination be said to be in need of it—was about £7·50. The average payment to be made to the groups that we have selected for help under the scheme will be about £50. Surely it is better to give really worthwhile help to the people who stand in the greatest need than try to spread the butter too thinly across a much larger number.

Mr. Thomas Cox: Is the Minister aware that the biggest single problem that elderly people face is in meeting heating costs? This evening there will be utter disbelief throughout the country when elderly people understand what the Minister has told the House. He seems to be in some confusion. The electricity discount scheme and the heating allowances were totally separate schemes, and there was no restriction on them. Now there is a restriction to the age of 75. Will the Minister spell out to the House and to pensioners what kind of provision there will be for pensioners well below the age of 75 who will most certainly have very great difficulty in paying their electricity and other heating bills this coming winter?

Mr. Jenkin: The hon. Gentleman does not seem to have borne in mind that next month there will be an increase in the pension and in other long-term benefits of about 19½ per cent., which includes an amount to make up for the shortfall in the increase last year given by the previous Government. For the period over which the forecast had to be made, the level of fuel prices has risen less than that. I made this point in my statement.

It is not correct to say that pensioners will face even tougher fuel bills this winter. As for the future, I have given an undertaking that we shall keep our policies under review, but concerning the past year the hon. Member's general point is not correct.

Mr. Winnick: What kind of Tory justice is it that can give so much to the rich in the Budget and take away the electricity discount scheme, which has provided assistance for so many in the community? How many will be sent to hospital? How many elderly, aged and poor people will die this winter because of the right hon. Gentleman's statement?

Mr. Jenkin: The hon. Gentleman will no doubt enjoy his exaggerations. However, they bear no relation to reality, and he knows it.

Mr. Allen McKay: Is the right hon Gentleman aware that his decision will lead people in my constituency to choose between paying the electricity bill and being warm and paying the rent? If they do not pay the rent, they will be turned out and be homeless; if they do not pay the electricity bill, they will be in danger of suffering from hypothermia. My constituents will be not disappointed; they will be disgusted and dismayed that yet again the Government have chosen to take from the poor to give to the rich.

Mr. Jenkin: There is nothing in my statement about giving anything to the rich. Is the hon. Gentleman seriously telling the House that in a year when incomes from employment have gone up and when incomes from benefits will have gone up by at least 17½ per cent., or 19½ per cent, in the case of long-term benefits, an annual payment of about £7·50 will make the difference between starving or paying the rent? The hon. Gentleman should get a little sense of proportion into the matter.

Mr. Hooley: Is the Secretary of State aware that the special scheme that he has just announced will help less than 2 per cent, of all retired people? What does he suppose the other 98 per cent, will do?

Mr. Jenkin: We aim to concentrate the help on the very old, where it is widely recognised that the problems of cold are more seriously felt.

Mr. Field: rose—

Mr. Speaker: Order. I do not think that the hon. Member for Birkenhead (Mr. Field) was standing when I said that I would call those hon. Members who had been rising. It would be unfair to the House if I extended the list, unless, as it is the first day back, the House were generous.

Mr. Field: Does the Minister agree that the poor are again on the receiving end of his cruel logic, which is that under the guise of concentrating help on those in greatest need, those who receive help, whose numbers are fewer than under the previous schemes, will receive less help individually both in real and in money terms?

Mr. Jenkin: No doubt we shall have an opportunity later in the Session to explore these matters. The fact is that under my right hon. and learned Friend's Budget last June, with the tax changes that were made and the benefits increases that were announced, the great majority of people will actually be a little better off.

Mr. Cormack: rose—

Mr. Speaker: Order. I think that it will hold the balance if I call the hon. Gentleman.

Mr. Cormack: Is it not nauseating to listen to some Opposition statements bearing in mind that, according to many statements made at the Labour Party conference and elsewhere, the poor suffered far more in the five years of the Labour Government than in any previous period? [Interruption.]

Mr. Jenkin: My hon. Friend is quite right. The basic truth remains that the amount of help that we can afford to give to people at the bottom of the income scale—the standard of living of the poorest in this country—depends overwhelmingly more on the ability of the country to create resources than on tinkering about with the redistribution of wealth.

Mr. Orme: rose—

Mr. Speaker: Order. Before I call the Opposition Front Bench spokesman, I thought I heard someone say "You are lying". It is not my habit to lie, and it

is an unparliamentary expression, which should not have been used.

Mr. Orme: Does the right hon. Gentleman agree that the basis of his statement means that there will be a reduction in support, for people who need it, from £45 million to £16½ million? I assure him that we shall return to this matter time and time again.

Mr. Jenkin: I think that that merely shows the sterility of the right hon. Gentleman's mind.

NEW MEMBER

The following Member made the Affirmation required by law: Robert Litherland Esq., for Manchester, Central.

POST OFFICE (REORGANISATION)

Mr. Harry Ewing: On a point of order, Mr. Speaker. First, I apologise for the late notice that I gave you of my intention to raise this matter. Earlier I advised the Department of Industry that I intended to raise this matter.
My point of order concerns a statement made by the Secretary of State for Industry early in September when he indicated that he accepted the Carter committee's proposals to split the Post Office into two businesses. Following that statement, the chairman of the Post Office Board, Sir William Barlow—according to Sir William, with the support and encouragement of the Secretary of State for Industry—has begun to take steps to split the Post Office in anticipation of the legislation being tabled.
I suggest that this is a very important matter for the House of Commons, not particularly because of the issue involved but because of the action now being taken by the chairman of the Post Office Board with the support of the Secretary of State for Industry.
I have in my hand a document circulated to members of the Post Office Board by the chairman, in which he outlines his intention to establish the two businesses by the summer of 1980—next year.
The important point is that, according to the chairman, he has been advised by the Secretary of State for Industry that


the legislation will not be introduced during this Session but will be contained in the Queen's Speech for introduction in the next Session with Royal Assent towards the middle of 1981.
The position will be that in late 1980—say, November 1980, the start of the new Session—the House will be presented with legislation which will relate to a fait accompli because of the action of the chairman of the Post Office Board.
In my estimation, the point that I have raised is both complex and very important for the House of Commons. For that reason, I should not expect you, Mr. Speaker, to rule on it today. Therefore, I should be happy if you would agree to consider the matter and give your ruling at a later date.

Mr. Speaker: I am obliged to the hon. Gentleman. I readily accede to his request to look into the matter and to make a statement to the House not today but in the near future. I should mislead the House if I did not indicate that I have serious doubts at this moment, before I look into it, whether it is a matter for me, but I shall look into it very carefully.

NORTHERN IRELAND (TERRORISM)

Rev. Ian Paisley: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the spate of terrorist killings in Northern Ireland.
Since the House adjourned, there has been a grim catalogue of desperate and bloody deeds done in the name of terrorism in Northern Ireland. On 2 August, two members of the British Army were murdered by a land mine in South Armagh and on the same day a member of the Royal Ulster Constabulary was shot dead in the Falls area of Belfast.
On 10 August a civilian was shot at Garvagh. The excuse given by the IRA was that three of the dead man's brothers served with the Ulster Defence Regiment. On 27 August, there was the Warren-point massacre, when 18 members of the British Army were done to death. On 28 August, a civilian was shot at his home in the city of Belfast.
On 1 September a civilian was shot at his greengrocery establishment in Belfast. On 3 September, another civilian was shot at his home in Belfast. On 14 September a prison officer was shot dead near the Crumlin Road. On 19 September, the assistant prison governor of the Crumlin Road prison was shot at the same spot.
On 3 October—this month—a civilian was shot at her home in Belfast. On 5 October a member of the UDR was shot at Bessbrook. On 5 October another civilian was shot in South Armagh. On 8 October a member of the British Army was shot in Belfast. On 12 October a solicitor was shot in West Belfast. On 15 October another UDR man was shot at Rosslea school. On 19 October, another member of the UDR was shot at Fintona.
There have been 34 deaths since the House rose for the Summer Recess. Of those, 29 were claimed to have been committed by the Irish Republican Army, 22 of which occurred in the border area.
Of the other five deaths the UFF—Ulster Freedom Fighters—claims at least two, and it is thought that it was responsible for all five.
If these deaths had occurred in Great Britain in the same ratio, this House would have had 1,200 deaths on its hands. There have been 87 deaths so far this year in Northern Ireland, and that would be equivalent to 3,100 in the rest of Great Britain. As a result of the troubles in Ulster, there have been 1,968 deaths in Ulster to date, which is equivalent to 71,000 in Great Britain terms.
This is a most serious matter. I have not included in the figures the tragedy that occurred in the Irish Republic when Lord Mountbatten and his friends were so diabolically done to death as that was outside the jurisdiction of this House.
I say to you, Sir, that the people of Northern Ireland expect this House to have an immediate debate upon this matter so that they might know that this House understands the terrible dark shadow that lies across the Province, and in order that the Government will take effective steps to deal with terrorism in the Province.

Mr. Speaker: The hon. Member for Antrim, North (Rev. Ian Paisley) gave me notice before 12 midday today that he would seek to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the spate of terrorist killings in Northern Ireland.
The House will have listened with deep concern to what the hon. Gentleman said. In order that the House and the people of Northern Ireland should know that I do not decide whether this matter is to be debated, but whether the order of business shall be changed tonight or tomorrow, I remind the House that, under Standing Order No. 9, I am directed to take into account the several factors set out in the order but to give no reasons for my decision.
I listened with anxious concern to the representations of the hon. Gentleman, but I have to rule that his submission does not fall within the provisions of the Standing Order. Therefore, I cannot submit his application to the House. My

powers are limited to deciding whether the debate should be tonight or tomorrow.

SCOTLAND (ECONOMIC SITUATION)

Mr. Gordon Wilson: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the rapid deterioration of the Scottish economy in the light of the impending redundancies in shipbuilding and Singer's works at Clydebank, and the decision of the National Enterprise Board to exclude Scotland as a base for one of its proposed micro-electronic manufacturing plants.
We have heard, Mr. Speaker, of the tragic events in Northern Ireland and we all share the sympathy that you have expressed with those who live in the Province. My application under Standing Order No. 9 relates to something which, in another way, is equally tragic—the growing tide of unemployment affecting Scotland.
Since the turn of the year, approximately 21,000 jobs, on one estimate, have been lost in Scotland as a result of the economic downturn. Indeed, since the House rose for the recess there have been announcements of closures and redundancies that have shocked the Scottish community to the core. I refer in particular to the shipbuilding closures, with the consequent redundancies, some of which have been ameliorated. In the case of Robb Caledon Shipbuilders Limited, in my own constituency, a reprieve—I hope permanent—has been given, although 1,100 jobs were threatened. The large manufacturing firm of Timex, again in my own constituency, is considering making 600 people redundant. The effect of that would be to bring unemployment in Dundee up to about 13 per cent.
Elsewhere in Scotland we have heard of the redundancies that are taking place at Singer's factory, where 3,000 jobs will be lost as a result of the impending closure of that plant, with no prospect of any new major enterprise coming to the area. Of course, the House has also heard, through the newspapers, about the decision that has been taken by the National Enterprise Board that Scotland is not to be considered as a base for the


new microelectronic plants which are to be sponsored by the board with public money.
In view of the tragic effects of unemployment on the Scottish community, and the fears of redundancy, I hope that the House will take these matters into consideration and, through you, Sir, arrange an urgent debate on these matters.

Mr. Speaker: The hon. Member for Dundee, East (Mr. Wilson) gave me notice before 12 o'clock midday today that he would seek to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the rapid deterioration of the Scottish economy in the light of the impending redundancies in shipbuilding and Singer's works at Clydebank, and the decision of the National Enterprise Board to exclude Scotland as a base for one of its proposed micro-electronic manufacturing plants.
As the House knows, under Standing Order No. 9, I am directed to take into account the several factors set out in the order, but the House has specifically instructed me to give no reasons for my decision.
I listened very carefully to what the hon. Gentleman submitted but I have to rule that his submission does not fall within the provisions of the Standing Order and therefore I cannot submit his application to the House.

Orders of the Day — COMPANIES BILL [Lords]

Order for Second Reading read.

Mr. Speaker: I have received a manuscript amendment in the name of the hon. Member for Hackney, Central (Mr. Davis) and those of his right hon. and hon. Friends. The amendment reads as follows:
That this House declines to give a Second Reading to a Companies Bill which neglects to provide for any substantial reform of company law and, in particular, to prohibit insider dealing or to require directors to have regard to the interests of employees.
It was impossible for this amendment to have been tabled when the House was in recess. I accept it and select it for debate.

4.30 p.m.

The Minister of State, Department of Trade (Mr. Cecil Parkinson): I beg to move, That the Bill be now read a Second time.
It may well be that by the time I have finished my remarks the hon. Member for Hackney, Central (Mr. Davis) will have changed his mind about his proposed reasoned amendment.
A number of hon. Members will share with me a feeling that we have been here before, since this Companies Bill, principally to implement the EEC second directive on company law, bears a strong resemblance to the first three parts of the Bill that received a Second Reading last November and which was examined by some of us in Standing Committee for some 24 sittings of about 60 hours in total before the hon. Member for Fermanagh and South Tyrone (Mr. Maguire) decided to come over to Westminster and to abstain in person in the debate on the fateful censure motion in April this year, thus helping to precipitate the general election.
It is an interesting fact that no fewer than four of my hon. Friends who served on that Committee—the hon. Members for Maldon (Mr. Wakeham), Norfolk, South (Mr. MacGregor), City of London and Westminster, South (Mr. Brooke) and Gloucestershire, South (Mr. Cope)—made such distinguished and entertaining contributions to our debate that, as a reward, they are now Government Whips and, as


such, are unable to take part in our debates. Their contributions will be sorely missed, but it is a distinct possibility that the debates in Committee could as a result be considerably shorter.
However, there are present on the Conservative Benches a number of great authorities on company law—people who at the drop of a hat can make a 15-minute speech. We have acquired a valuable reinforcement in the person of my hon. Friend the Member for Dorset, North (Mr. Baker), who advised us as members of the Committee last time in his capacity as a distinguished solicitor. I hope that my hon. Friend will now be in a position to put forward his own arguments in his own words.
Relative brevity is a novel concept in the area of company law, but before looking relatively briefly at the detailed provisions of the Bill as it now stands I want to put the Bill into the context of the Government's present programme of company law reform. When we came into office, the first priority was to meet our obligations to implement the second directive. The United Kingdom was already out of time, since the legislation should have been in operation since December 1978. Some other member States have also experienced difficulties both in deciding how precisely they should modify their codes to meet the directive and in getting legislative approval, but in our view this is no justification for us deliberately to drag our feet when our proposals have been formulated, widely discussed and largely agreed. I would also be the first to acknowledge that in its present form the Bill is essentially the first three parts of the Bill introduced by the last Government, but as significantly amended and—I believe—improved in Standing Committee.

Mr. Donald Anderson: Is it right that only one member State has thus far implemented the directive?

Mr. Parkinson: I cannot answer that point but I shall find out and let the hon. Gentleman know. This need to press ahead to implement the directive meant that we did not want to hold up the Bill while we considered whether to include other measures of company law reform. We had intended to introduce a second Bill in the current Session, which would have implemented the EEC fourth directive

and included many of the topics that had been included in parts IV and V of the 1978 Bill. That second Bill will now be introduced in the 1980–81 Session.
In the circumstances, we have decided to include certain other measures in this Bill. In a moment I shall discuss our views on what further topics should be dealt with in the Bill, but at this stage I want to stress that this is only our first Bill.
The Bill that we plan to introduce in the 1930–81 Session will provide the legislative framework for the implementation of the EEC fourth directive on company accounts. We recently published a substantial Green Paper entitled "Company Accounting and Disclosures". This sets out in detail proposals on the changes in the form and content of accounts, resulting not simply from the directive but also from a reappraisal of the present statutory and non-statutory requirements of our own law. The House knows of the Government's determination to relieve smaller companies of a number of statutory and non-statutory requirements could provide an important and much overdue relief for small independent private companies from onerous disclosure provisions to which they are now subject. The Green Paper also invites comments on the difficult question whether the accounts of these small companies should continue to have to be audited.
The 1980–81 Bill may well also provide a vehicle for further changes in substantive company law including, we hope, the introduction of further flexibility for small companies. More immediately, the Government will be making an order to increase the monetary levels above which companies have to disclose information about turnover and the remuneration of employees and directors. This order will be laid before Christmas and will serve to restore the figures to realistic levels after the effects of a decade or so of inflation.
The proposals are set out in chapter IV of the Green Paper to which I referred, but the House may like to know what they are. We propose that the exemption figure for disclosure of turnover should be raised from £250,000 to £1 million. As to disclosure of directors' earnings, the proposal is that the threshold figure


should be raised from £15,000 to £40,000. It is suggested that the bands should be raised from £2,500 to £5,000. On the question of the disclosure of the number of highly paid employees, it is suggested that the qualifying figure should be raised from £10,000 to £20,000.

Mr. J. Enoch Powell: The Minister will be aware that in clause 58 there is a provision that simplifies the application of the Bill's provisions to Northern Ireland. He has just indicated the intention to make an order. Will he clarify whether this will be a Great Britain or United Kingdom order? If, under our present arrangements, the order cannot be made to apply to the United Kingdom as a whole, can he give an assurance that steps will be taken to ensure that the corresponding Northern Ireland order comes into effect simultaneously with that covering Great Britain? I apologise for interrupting the hon. Gentleman.

Mr. Parkinson: I thank the right hon. Gentleman for giving me the opportunity of making clear what the Government's position is. The answer to his question is "Yes". As he knows, we share his ambition that the law affecting companies should be the same in all parts of the United Kingdom.
I turn now to the Bill as it stands. Part I introduces a new definition of "public company", and private companies will, once the Bill becomes law, form a residual category of company. This reverses the present position, and we believe that it introduces a more realistic division between the two categories. It reflects the approach of the second directive, which applies only to public companies but also lays a sound foundation for further differentiation in due course between public and private companies or betwen proprietary companies and others.
Perhaps the best known feature of part I is the new designation of public companies, which will now be known as "public limited companies", or "PLC", with Welsh alternatives that I shall not attempt to pronounce or to mispronounce.
There seems to be widespread agreement that the new name is rather unsatisfactory. There is an equally widespread inability to devise a better one. Therefore,

the name of the new companies will be "public limited companies."
Furthermore, public companies are to have a minimum subscribed capital of £50,000. Part I contains machinery for existing companies to settle their status under the new classification and for companies to change their status from public to private or vice versa.
Part II deals broadly with the share capital of companies. Clause 14 provides for shareholder consent to the issue of share capital, and clauses 17 to 19 deal with the rights of pre-emption of existing shareholders when shares are issued for cash. In both cases, the protection afforded to shareholders is, we believe, valuable and worth while, and therefore, whilst the directive does not require it, these clauses extend to private companies as well as public ones.
There was a great deal of debate about this matter in Committee on the previous Bill, and it was fairly widely agreed that shareholders in private companies are quite possibly in more need of protection than shareholders in public companies. I hope that the House will agree that this measure should be extended to private companies.
Clauses 21 to 31 deal with the way in which share capital is to be paid up. Most of these rules represent a new departure in United Kingdom company law and are restricted to public companies. The exceptions are clause 20, where shares are to be paid up in money or money's worth, and clause 21, which prohibits the issue of shares at a discount. In both cases these are restatements of the present law and apply to private companies. As for public companies, further clauses provide some assurance of substance concerning their share capital. Other provisions of clause 20 prohibit the payment for shares by promises to do work or provide services.
Clause 22 requires shares to be paid up on allotment as to at least 25 per cent. of the nominal value and the whole of any premium. This again was a point that was discussed at some length in the previous Committee, and Opposition Members who started doubting whether the then Government's proposals were right found the arguments in favour of demanding the whole of the premium


compelling. That is why the Bill is in its present form.
Clause 23 requires non-cash assets to be transferred to a company within five years when shares are allotted in return for promises for such assets. Clause 24 contains important provisions for an independent expert to value non-cash assets which pay up shares on an allotment.
Clauses 32 and 33 deal with class rights and clarify and extend the law, as recommended broadly by the Jenkins committee on company law as long ago as 1962.
Clause 34 obliges directors to summon a general meeting of shareholders when the net assets of the company fall below 50 per cent. of the subscribed capital. This is an interesting innovation. The idea behind it is a good one. It means that if a company is in difficulties, the directors have to call a general meeting and give the shareholders an opportunity to express an opinion about the future of the company and about the future action that the directors ought to take while there is still time to save the company.
Clauses 35 to 38 deal with circumstances where a company acquires or seeks to acquire interests in its own shares. In Committee a number of colleagues argued very strongly that small companies, in particular, should have this right. The Government have an open mind about the matter. A consultative document will be issued. I am sure that this is a subject to which we can return in Committee.

Mr. Tim Renton: Will my hon. Friend tell the House why he thought it necessary in this Bill to codify, in clause 35, the existing common law practice that a company cannot buy in its own shares, when I understand from what my noble Friend Lord Trenchard said in another place that the Government are very actively considering this position, with the possibility of permitting companies to buy in their own shares in the next Companies Bill, perhaps in the 1980–81 Session?

Mr. Parkinson: As I said a moment or two ago, the Government are very sympathetic to the argument that companies, especially private companies, should have the right to buy their shares.

A consultative document will be issued. We are taking soundings. I hope that it will be possible, even in this Bill, to come forward with proposals, but that will depend on how the consultations go.
Part III contains new rules governing the distribution of profits to shareholders. Our law in this area is, to say the least, confused. The opportunity has therefore been taken to carry out an extensive and long overdue reform that embodies not only the requirements of the second directive but certain provisions of the fourth directive. The main provisions are contained in clauses 39 and 40. These provide a new definition of distributable profits, which excludes unrealised profits, require all companies to make good realised losses before a distribution can be made and oblige public companies, in paying dividends, to maintain their share capital and undistributable reserves, thereby requiring them to make good any unrealised losses to the extent that they exceed unrealised profits.
Special rules are set out in clause 41 to regulate distributions by investment companies whose ability to pay dividends could be impaired by the general provisions.
Clause 43 provides that the question whether a distribution can be made and the amount legally available for distribution are to be determined by reference to the accounts, and clause 44 provides for the recovery of dividends made in contravention of the provisions of the Bill.

Mr. Clinton Davis: Will the Minister confirm that part III of the Bill is, in fact, in every respect, identical to part III of the earlier Bill introduced by the Labour Government?

Mr. Parkinson: The hon. Gentleman's remark is broadly correct. I believe that there may be a small change, in that in the original Bill interim accounts—accounts which were necessary to support an interim dividend—had to be audited. I believe that that provision has now been dropped and that as a result it is possible for companies to pay dividends on unaudited accounts. Certainly the previous Committee was stuffed full of accountants, and they proved their altruism by arguing very forcefully that accountants should be called on to do less and less work for their clients and charge them smaller and smaller fees.
Clauses 46, 47 and 51 were added to the Bill in another place. The first clause deals with the power of a company to provide for employees on cessation or transfer of business. Clause 46 in its present form, however, does not satisfactorily repeal the rule in Parke v The Daily News, and we shall be coming forward with amendments in Committee to make it more effective. In its present form the duty imposed on an auditor clashes with that imposed under the 1948 Act, and we wish to make the clause far clearer and more specific.
Clause 47 provides the court with wider and, I hope, more effective powers to protect members whose interests are unfairly prejudiced, and clause 51 revises penalties and modes of trial in the Companies Acts, together with the lengthy schedule 2 that supports it.
Finally, I should mention clause 48, which prohibits trading under a misleading name. Representations have been received about the burdens imposed on companies that are presently public and wish to remain so under the new classification. They will therefore have to change their name to include the new designation "public limited company" or "PLC". Following consultations with interested groups during the summer, we propose to introduce amendments to the clause, as was indicated at the Report stage in another place. They will allow a longer period for the change-over by a public company from its old to its new name. We also propose that the offence of a public company trading under its old name should to some extent be narrowed. These changes are intended to ease the cost and disruption caused by the change and, I am pleased to say, have been widely welcomed.
I turn now to consider what further provisions the Government believe might be included in the present Bill. Those who have read the reports of the Committee stage of the 1978 Bill will realise that although there was widespread support for the objectives of much of parts IV and V of that Bill there were grave reservations about the detailed proposals. However, as a result of that Committee stage, we have identified certain topics in respect of which we believe debates inside and outside the House have defined the issues with sufficient clarity to enable

us to bring forward proposals of real value. We consider that there are four groups of provisions for consideration, of which three deal with the duties of directors and the fourth with insider dealing.
The first new proposals deal with cases in which a director's personal interests may conflict with the wider interests of the company. The Government believe that it is important to legislate quickly to tighten the existing provisions controlling loans by a public company to its directors and companies and individuals connected with those directors, and in the light of recent evidence of abuse from the Peachy affair we intend to extend that provision to other credit transactions. Amendments on these subjects will be moved by the Government in Committee.
These provisions are intended to block the loopholes of which the unscrupulous director might be tempted to take advantage, and there will be criminal sanctions where the law is flouted. There has been recent evidence in inspectors' reports and elsewhere that for some individuals such sanctions are clearly necessary, and we propose to act firmly against those individuals.

Mr. Anthony Nelson: In drafting the legislation, has my hon. Friend considered the experience of recent years, when a number of public companies, particularly in the financial sector, made loans to directors of other public companies in the same sphere of business in a way that would avoid the obligation to declare such loans, and there were reciprocal guarantees so that no liability, or less liability, fell on the individual companies? In many cases that may pose the same threat as a direct loan from a company to its own director. While I recognise that is difficult to legislate against that, I ask my hon. Friend if he is at all concerned and has sought ways of combating it through the law?

Mr. Parkinson: A great deal of thought has been given to that problem, and it was debated at considerable length when considering the previous Government's proposals on loans to directors. We could clearly see that all that would be necessary to get round the proposals would be for the directors of one bank


to borrow money from another and for there to be a reciprocal arrangement. We have identified the problem and are working on it. I hope that our proposals will deal with this.
I was saying that sanctions are necessary and that we propose to act firmly against certain individuals. As part of the same package we shall be proposing, as further amendments to the Bill, that directors' service contracts lasting for more than five years and for property transactions between a company and a director shall both require the express approval of a general meeting. Further, and most importantly, we shall provide for the disclosure to members of the details of all these transactions. It is important that members of a company have at their disposal information concerning the type of transactions of which I have been speaking.
We have also considered those clauses in the last Bill that sought to codify the existing case law on the fiduciary duties and the duty of skill and care of directors. The provision of such a statutory statement involves a difficult judgment. On the one hand, would it serve to bring home more clearly to directors the extent of their obligations, and, on the other, would such a statement hinder the continuing development of that branch of the law? That is the question that faces the House and will face the Committee. The clauses in the last Bill represented a worthwhile attempt to answer that question, but were in our view far from satisfactory. After careful consideration, I do not believe that such clauses bring sufficient advantages to outweigh the inflexibility threatened by such legislation. We therefore do not propose to bring these clauses forward in Committee.
The third aspect of the duties of directors that we have examined is the duty to consider the interests of the company's employees. There is wide recognition in the House and elsewhere that the existing law will not reflect what really happens in industry and commerce even when the rule in Parke v The Daily News has been reversed by clause 46, as amended, of the Bill. Recognising a problem is one thing but drafting a clause that does not make it worse is another. The previous Government's proposal would have caused problems and would not have

solved them. We wish to see company law state clearly and explicitly the duty of directors to consider the interests of employees.
We hope that it will be possible to bring forward an amendment to require directors in the performance of their duties to the company to consider the interests of their employees. We wish to make it clear that that obligation will be enforceable by the company, since it is the company which is at present in a position to take action against directors for any breach of duty. It would be quite unacceptable to open up an easy route for frivolous or obstructive actions in the courts.

Mr. Dafydd Wigley: Surely the hon. Gentleman is not saying that in these intended amendments there will be no avenue for employees to take action if necessary?

Mr. Parkinson: The hon. Member for Caernarvon (Mr. Wigley) takes a great interest in these matters and was assiduously present for the whole of the 60 hours to which I referred, but I hope that he will allow me to finish what I am saying and set out the Government's proposal. Our intention is that the provision will indicate that the obligation shall be owed to that body to which the director is responsible—the company. Our hope is that this clause will confirm the care with which responsible boards already consider the interests of their employees and act as an encouragement for others to do the same.
We believe that we have succeeded in drafting a suitable clause, and unless unexpected difficulties appear we will be introducing this new clause in Committee. I look forward to having the opportunity to debate it with the hon. Member for Caernarvon.
Finally, I turn to insider dealing. I do so with some trepidation, since history teaches us that Governments that come forward with legislative proposals to make insider dealing a criminal offence suffer a powerful, and almost divine retribution shortly after at the hands of the electorate. However, I seriously hope that it will be a case of "third time lucky".
It is the Government's ambition to see that as many people as possible own shares in the company in which they work


and to see a much wider spread of share ownership. It is essential that such small shareholders develop confidence in the market and do not feel that they are at the mercy of the unscrupulous. Therefore, there is general agreement that insider dealing should now be made a criminal offence.
There are legitimate interests that need to be protected and, of course, the problems are formidable in drafting legislation that hits firmly and surely at the villains but does not harm or threaten the innocent. I know from what the former Secretary of State said during the Second Reading of the Companies Bill last November that he takes that view. I also know that the hon. Member for Hackney, Central takes that view.
We believe that self-regulation by the City generally offers the firmest, fastest and most responsive system of making rules for and policing the financial markets. I believe that the City is fully aware that its performance in sustaining public confidence through effective self-regulation is under close scrutiny from a variety of sources, not all of which are favourably disposed towards either the principles of self-regulation or the City. However, there are instances where self-regulation is not enough and where the City and others call for legislation.
I believe that insider dealing is a prime example of this. It is now seven years since the Panel on Take-overs and Mergers and the Stock Exchange first called for legislation to make insider dealing a criminal offence. The Council for the Securities Industry repeated the call recently. In our endorsement of a mixture of self-regulation and statutory provisions, we are very much at one with the previous Administration.
But when we turn to legislation on insider dealing we differ profoundly on what is called for. The proposals of the previous Government, as set out in clauses 57 to 63 of the last Bill, were, in some respects, sound and fair but there were grave and crucial defects in vital areas. These clauses provoked a widespread response, and there was general agreement that they were fatally flawed. The previous Government consulted widely on their proposals but I must say that it was disconcerting, to say the least, to see them ignore the fully argued and

fundamental objections which were put to them.
Since May we have looked again at the issues involved and we have prepared draft clauses which we believe strike at the guilty without prejudicing the innocent. We propose a more accurate definition of inside information and a fairer and a more rational definition of insiders. We have scrapped the duty of disclosure in deals off the stock exchange, which could so easily have been evaded by wrongdoers but which would equally easily have trapped the quite innocent. In its place we have extended the prohibitions on dealings on stock exchanges to dealings involving professional dealers and securities with a market price on any other market. Therefore, we believe that the proposed offences are more realistically and effectively defined, yet do not imperil employees and directors who wish to take a stake in their company. They will not prohibit institutional shareholders from taking a more active role and interest in the performance of companies in which they invest. Financial analysts should not be inhibited from doing their normal job.
We believe that our new proposals offer the best hope yet of solving what we all agree is a difficult problem. I am sure that the House will agree that it would be wrong to put these proposals forward as amendments to the Bill before the public have had an opportunity to analyse and comment on them. Therefore, the Government have today published a consultative document containing the draft clauses, and copies have been placed in the Library and the Vote Office. We do not propose that this consultation should be long drawn out, for I believe that the issues involved have already been much aired and are fresh in people's minds. Therefore, there is a real possibility of these clauses being tabled by the Government as amendments to the present Bill if the results of that consultation do not show up problems that we had missed. I urge all interested parties to come to a view as rapidly as possible on these proposals. If it emerges that more time is required, the inclusion of these provisions in the Bill that we intend to introduce in the 1980–81 session would provide a sensible option, but naturally we hope that further delay will


not be necessary. The Government will take all possible steps to make sure that they are in a position to come forward with their proposals in Committee.

Mr. Clinton Davis: The Minister will realise that this aspect of his remarks is absolutely crucial to the decision that we make later in this debate. What he has said does not allay our anxieties. Could he be more specific about the timetable for the consultations? What is the reasonable likelihood of these consultations being concluded in sufficient time for the Government to be able to table amendments for the Committee stage in this House? Will he also indicate whether the Government will delay the Committee stage if they feel that consultation needs to be extended in time? This matter is absolutely critical for the Opposition.

Mr. Wigley: On a point of order, Mr. Deputy Speaker. I have just been to the Vote Office and have found that there is no copy available of this consultative document. It was certainly not circulated to all parts of the House and it is not available for us to study. This is an important point, in view of the importance that the document has assumed in this debate.

Mr. Deputy Speaker (Mr. Bernard Weatherill): It is not a matter for the Chair that the document is not available in the Vote Office, but I am sure that the Minister on the Front Bench will take note of what has been said.

Mr. Parkinson: I took the utmost precaution to ensure that the documents were in the Vote Office and in the Library. On the last occasion that this occurred it turned out that the documents were there but they had not been discovered by the person in charge. If they are not there I apologise most sincerely, but I made three separate checks this morning that the document had been lodged. If they are not there I apologise, but I would also expect to receive some apologies myself.
The hon. Member for Hackney, Central raised a very important matter. We are treating this as a matter of extreme urgency. We would like to see our proposals included in this Bill. Provisional consultations have been held and the document has been issued today. I have

made it clear that we wish people to treat this with the same urgency if the Government are to come forward with their view as soon as possible. In addition, we have arranged that the Committee stage should not start until 6 November, so that we can have more time to conclude the consultations. I cannot say more than that. I have outlined our ambitions and expressed our intention, if possible, to introduce the clauses which I have detailed.

Mr. Clinton Davis: We are looking for an undertaking by the Government. I can promise the Minister that parts I, II and III of the Bill, which have been scrutinised extensively, will not be delayed in Committee. Therefore, we shall rapidly reach that part of the Bill which covers insider dealing. Would it not be better to delay the Committee stage? I hope that the Minister will consider that proposal favourably.

Mr. Parkinson: The hon. Member for Hackney, Central has made a reasonable point. We have arranged for the Committee stage to be delayed a little. I am pleased that we shall reach a speedy conclusion to the first three parts of the Bill.
We shall consider seriously the hon. Member's representations. I hope that when he reads my remarks he will conclude that it is best to proceed as I suggest. We shall consider his suggestion and be in touch with him.

Mr. Douglas Jay: What was the major flaw in the previous Government's intentions for insider dealing? How do the Government propose to overcome that flaw?

Mr. Parkinson: Briefly, we felt that the definition of "insider" was too general. We felt that the definition of "inside information" was too vague and that those carrying out legitimate jobs, such as analysts and jobbers, could be threatened by the orginal definition. We have tried to tighten up the definition. I hope that we have improved it.
I stress that we believe that insider dealing should be a criminal offence. We wish to introduce effective legislation to deal with it. I commend the Bill to the House as the first instalment of the new Government's work on company law reform.

5.13 p.m.

Mr. Clinton Davis: I beg to move,
That this House declines to give a Second Reading to a Companies Bill which neglects to provide for any substantial reform of company law and, in particular, to prohibit insider dealing or to require directors to have regard to the interests of employees.
My colleagues and I shall consider carefully what the Minister has said. His undertakings fell far short of those required by the Opposition. We hope that the Government will give two clear undertakings. First, that the Committee stage of the Bill will not commence on 6 November. That would be an inadequate delay. We hope that the Committee stage will begin when the House reassembles after the Christmas Recess. Secondly, we hope that there will be a clear undertaking to introduce amendments, which the Government could have introduced already, to deal with insider dealing.
The Minister's explanation was inadequate in that respect. I do not wish to be too churlish, because I intend to compliment the Minister. However, he could have adopted the same approach to insider dealing as he proposes to adopt to the duties of directors towards employees and their fiduciary duties towards companies. That would have been a sensible approach. We should not have needed a consultative document because there would have been adequate time for the Government to decide whether they intended to proceed with amendments.
It would be no badge of shame for the Government to say that in the light of representations they believe that their clauses should be amended. That has been done many times before.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): That is exactly what we have done.

Mr. Davis: I heard that aside. The Government have not done that. We looked for a clear commitment from the Government but they shied away from it. The Government are saying that they will consider the proposals but that they will not necessarily include them in the Bill because of the lack of time. We are not prepared to accept that.
I shall be fair to the Minister. He made a helpful speech. I am glad that he conceded many of the points about which the Opposition were anxious. I recall warning him that we would fight his decision to introduce this truncated Bill. He has taken our point except in the material particulars to which I have referred.
I suspect that the reason for the Government's change of heart is that the Minister of State knows something about company law. He recognises the urgent need to tackle the many aspects of company law reform which are overdue. He recognises the force of our arguments but he has had a fierce battle within his Department, not least with his doctrinaire Secretary of State. The Secretary of State is the Harry Worth of doctrinaires. He is constantly entertaining but everything to which he turns his hand seems to disintegrate about him.
Before the recess there was a fiasco over the Competition Bill, which resulted in a terrible state of pique on the part of the Secretary of State, the right hon. Member for St. Ives (Mr. Nott). There was obvious disagreement with the Leader of the House, and the right hon. Gentleman made a two-minute speech to introduce the Bill. It was a new speed—one "Nott" per two minutes. That example was not followed by the Minister of State today.
The Secretary of State neglected to consult management and trade unions about civil aviation matters and the asset stripping policy on which he proposes to embark. A schizophrenic attitude is taken to company law reform. It is not a question of second thoughts but of fourth thoughts. The first thought was to limit the Bill to the implementation of the second directive. The second thought was to introduce minor amendments in the House of Lords. The third thought was to refuse to go beyond that. The fourth thought was to resile from all that and heed the Opposition's advice. We shall examine the Government's proposed amendments with care. I am grateful to the Minister for sending me the insider dealing document shortly before the debate, but, of course, I have not had time to scrutinise the proposals.
We felt fully justified in putting down a reasoned amdment because, as it stands, the Bill is significant only for what


it omits. I believe that my right hon. and hon. Friends and I should not be satisfied with the explanation that the Secretary of State has given about two matters. First, I refer to the duty of directors towards the interests of employees. Why was that matter not considered much more rapidly by the Government? The Secretary of State has always poured scorn on that idea but I believe that the Minister of State, the hon. Member for Hertfordshire, South (Mr. Parkinson), takes a different view.
We regard the proposal as being a necessary process in the movement towards industrial democracy. Here we depart very much from the Government's stance, which is "Do not include any legislative proposals to advance industrial democracy. Let it all proceed by way of the voluntary application of principles by companies." I do not believe that that process will work. Clearly, in Committee the hon. Member for Kensington (Sir B. Rhys Williams) envisaged that it would be necessary to embark on legislation to deal with industrial democracy, which he warmly welcomed. I applaud the attitude that he has displayed on the subject.
It is important that the Government should not remove the matter from the political agenda. If we are to vitalise and humanise our democracy not only in parliamentary terms but in the workplace we have to move strongly in the direction of industrial democracy, to qualify the adversary relationship in industry and make possible the involvement of people in decisions vitally affecting their daily working lives. I do not believe that the results will be achieved by exhortation alone.
I shall return to the question of corporate abuse and the need for legislation to deal with such matters. First, however, I wish to raise a number of points on which the House is entitled to explanations from the Minister when he winds up the debate, since the Minister of State mentioned nothing about these matters.
A document appears to have emanated from the registrar of companies putting forward proposals for certain economies to the users' committee. The Investors' Chronicle rightly described those proposals as "dangerously false econoes". Has such a document been put forward? Is the abolition of the Registry of Business Names propod? In the Bill of the

previous Government the Secretary of State was to be given power by statutory instrument to increase the fees of the Registry of Business Names. That power is not mentioned in the Bill.
The fees are grossly inadequate. They were fixed about 60 years ago and stand at 5p for a search and 25p to register a business name. Those figures are ludicrous. If the fees of the Registry of Business Names were to be increased to, say, £1 for a search and £5 for registration—I do not believe that anybody would reasonably cavil at those amounts—the loss sustained last year by the registry would be eliminated at a stroke. What is needed is not the abolition but the extension of the registration of business names. The system has improved in recent years and today it is largely policed by the banks. I believe that it would be helpful to have a system of re-registration every 12 months. That would enable accurate information to be available to many who are interested in such information emanating from the Registry of Business Names, and it would not be a heavy burden in any shape or form.
Abolition of the Registry of Business Names would be a severe blow aimed at small business men, about whose interest this Government profess such concern and enthusiasm. How can one proceed effectively to enforce one's rights to obtain redress by achieving a judgment of some value unless one can discover with certainty who is behind a trading name? A small business man trading under his name might also find it more difficult to obtain credit without the requirements which the Act now provides. Furthermore, what is the likely effect of the Government's proposals on EEC directives?
Another proposal evidently put forward by the registrar is that he will delay the process of company searches by 24 hours. That would represent a wholly unreasonable impediment to the financial press, the protection of investors, business men, trade unionists and others who want information about companies as a matter of urgency—for example, when injunction proceedings are considered.
The proposal has been made that the registrar should surrender his discretionary power to veto misleading names. I


cannot understand how that proposal is compatible with clause 48, which repeats the provisions in the earlier Bill about trading under misleading names. I hope that the Minister will be able to define the Government's intentions on that matter.
Yet another proposal is the waiving of the requirement that the business stationery of registered companies should bear the directors' names. I cannot see what possible saving there would be to the Government from that measure.
I believe that all the proposals represent retrograde steps in a service which is becoming increasingly efficient. It is a service for which there is no abatement of demand and which provides a speedy means of examining the activities of companies and firms. Since there is the omission of the proposal relating to the registration of business names we feel that we are entitled to know the Government's intentions.
What other economies do the Government have in mind? Will the system of investigations under sections 164 and 165 of the 1948 Act be curtailed? Those investigations can be expensive. However, we have seen repeatedly—as the Minister of State conceded in his speech—that the reports cast light on pretty murky dealings. The Secretary of State regards those reports as "un-British". I believe that they are valuable, but I should like to know whether they are destined for the chop. As the Investors' Chronicle has put it:
Are the Tories to be remembered as the Government which took the axe to the searchlight?
During the Second Reading debate on the Companies Bill my right hon. Friend the Member for Lanarkshire, North (Mr. Smith), the then Secretary of State, announced the establishment of a standing advisory committee on company law. In that committee, the professions, the industry, the City and the trade unions were to be represented. That committee was to undertake a continuing review of company law, to provide the Secretary of State with advice on general developments and to make specific proposals. That proposal was widely welcomed in the financial press and elsewhere. What will the Government do about that? Will they wind up the idea as part of their knee-jerk reactions to so-called quangos?

Or will they build on a constructive idea which could be of great value to future company law reform?
The previous Government embarked on a series of consultations between themselves, the Stock Exchange, the CBI, the professions and the trade unions. The Under-Secretary, the hon. Member for Birmingham, Hall Green (Mr. Eyre) recently made a speech referring to those consultations. It would be helpful if he would now inform the House of the Government's views about the matters which were the subject of those consultations. In that connection the previous Government made the point that we would wish to consider with the Stock Exchange—and hopefully persuade it to accept the proposal—that it should insist, as part of the listing requirement, that public companies should have audit committees. The New York Stock Exchange, under pressure from the Securities and Exchange Commission, thought it desirable to do that. I, too, think that it is a desirable step, and I should like to know the Government's view.
The position regarding minority shareholders was improved by our Bill, the provisions of which are almost, if not exactly, repeated in the Bill before us. However, in opposition the Secretary of State expressed doubt about whether the provisions went far enough and I think, on reflection, that he was probably right. We shall certainly explore that matter more fully in Committee because we ought to look at the operation of the rule in Foss v Harbottle to see whether further improvements can be achieved.
On the Second Reading of our Bill, the present Secretary of State referred to the situation of minority shareholders and said:
We need to give a prescriptive opportunity to shareholders to vote in general meeting when the directors seek to dispose of substantial assets without reference to the owners of those assets".—[Official Report, 20 November 1978: Vol. 958, c. 951.]
Why is there not the same enthusiasm on the part of the Government about the rights of employees? They are rightly concerned about the rights of shareholders, but we are talking also about people who have given long years of service—often a lifetime—to an industrial enterprise. They have as much right to be considered as have shareholders. It is unacceptable that company law


should require directors to act solely in the interests of shareholders.
We shall look with interest at the position that the Government will advance in, we hope, the near future by tabling their amendments with speed. It is unrealistic that that situation should continue. It is inconsistent with the practice of better companies. I do not go as far as the Secretary of State, who has said that it is the practice of all companies to obey those criteria. That is a naïve belief. It is also wrong that a director is unable to advance the defence to an action by a shareholder that he acted in the interests of employees. That is why we included the clause in our Bill, and I hope that the Government's clause will come up to reasonable expectations.
Turning to corporate abuse, I cannot help contrasting the venom and zeal with which the Conservative Party pursues abuse of the social security system, which involves about £4 million, with the reticence with which it seems to approach corporate abuse. We have to recognise that it is in a time of recession—and the current recession will inevitably be deepened by the implementation of the Government's economic policies—that shareholders, creditors and employees need most help in exposing shady behaviour and dubious practices. Action is also needed to ensure that a lack of probity and confidence does not rub off on to the good companies.
We must be ever-vigilant in seeking to prevent a recurrence of the events that occurred with such regularity in the early 1970s in the wake of Lord Barber's term as Chancellor of the Exchequer. Inspector's report after inspector's report has highlighted the problems. We have had Peachey, Lonrho, Dowgate, Ashbourne and the rest. Some abuses were tackled by our Bill, and I hope that these and others will be taken up by the present Government, but I am not confident that the self-regulatory system, even taking into account the Government's declarations of good faith on insider dealing, is sufficient to deal with such abuses.
I may be asked what we did about the problem when we were in Government. That is a fair point. We were faced with a great difficulty about legislative time and the City was putting forward proposals for reform in which we did not have complete faith, but which

were better than nothing. Also, with the agreement of my Secretary of State, I submitted a purely personal paper to the Wilson committee, seeking to expose the inadequacies of the self-regulatory system.
None of the actions of the early 1970s in all the companies that I have listed, and many more, would have been possible without the cupidity and willing compliance of certain merchant banks.
One of the principal badges of dishonour during the whole period of the Barber boom in confetti money must be pinned on the lapel of a number of those merchant banks, including Keyser Ullmann. The right hon. Member for Taunton (Mr. du Cann) is here, and I gave him notice that I intended to refer to the activities of that bank, of which he was once chairman. It is only right that I should refer to a comment made by the right hon. Gentleman in the Dow-gate report, when he said that the involvement of Keyser Ullmann in that report was "a very great mistake". He went on to say:
it should never have occurred.
How right he was!
The Dowgate case, like so many others, was a saga of abuse. Company funds were milked to provide ocean cruises for directors, conspiracies were undertaken to mislead the takeover panel—and largely succeeded because of the inadequacies of the panel—and there was the warehousing of shares and the manipulation of shares by Mr. Selmes who used them as his own and was helped by all sorts of compliant people. A Henry Moore sculpture worth about £20,000 was substituted, together with a few virtually worthless shares, for a guarantee worth £17 million.
Keyser Ullmann furnished 80 per cent. of the deal—£21 million was advanced to a £100 company in the hope that the bank would make a large profit over and above the interest on the money advanced. No wonder the right hon. Gentleman said that it was a very great mistake which should never have occurred. But that board evidently tended to discuss little of importance—and I wonder how widespread that practice is.
We know from press reports that prodigious loans were made to directors at


highly favourable rates of interest and on the most modest security. That was done without the knowledge of the full board. Some directors may have been consulted, but they were unlikely to object because in some respects they were the beneficiaries of such practices themselves. Such incestuous lending policies were justified on the spurious ground that such loans fell within the usual phrase:
normal or ordinary business of a bank, whose normal or ordinary business was lending money.
It is a pretty sordid affair and it was odd that the right hon. Member for Taunton, who used not a few opportunities in the House and elsewhere to pontificate about the extravagance of public expenditure, should have lent himself to such practices as the chairman of that company. It is no small wonder that Keyser Ullmann and others got into trouble.
They were baled out by the Bank of England's lifeboat scheme and I did not hear the right hon. Member for Leeds, North-East (Sir K. Joseph) proclaiming then that "all aids and grants to industry were harmful" when it came to succouring the secondary banks, which were largely the authors of their own misfortunes.
In terms of self-regulation, can we be happy about the activities of the takeover panel? We have had two successive reports—Dowgate and Ashbournewhere, as a result of the evidence revealed, it can hardly be claimed that it covered itself with glory. It made derisory inquiries and failed to put elementary questions. No proper request was made for documents to be divulged, and in effect it compounded the activities of those who were seeking to mislead it.
More seriously, it appears that the takeover panel was obstructive in responding to the inspectors' requests for assistance. It is no wonder that the Financial Times said on 15 May 1979 in relation to Dowgate:
With the benefit of four years' hindsight it is easy to see that this is just the type of case which makes a mockery of the principle of self-regulation. A code which is based on the assumption that the take-over game will be played in a gentlemanly sort of way is shown up to have been quite inadequate to cope with alleged conspiracy to lie, alleged bribery and a determination to ignore the interests of shareholders.

Mr. Renton: Doubtless the hon. Member is having great fun getting all this off his chest. It has been weighing increasingly on his chest for the past five years during which he was the Under-Secretary of State for Trade. Why on earth, if the hon. Gentleman feels so strongly about this, if he is not now making just a partisan political speech, did he not do something about it when he was in office? For him to say that he did not because he was receiving conflicting advice from the City is not a satisfactory answer. Surely the fact that he was receiving conflicting advice should have spurred him on to bring in legislation.

Mr. Davis: That is what we did. We introduced a Bill. The disclosure of loans to directors and the way in which directors were able to manipulate boards would largely have been dealt with if the Bill had become law. Perhaps that will still be the case. However, it is right that we should not push those matters under the table. They are relevant. Does not the hon. Gentleman agree with that? Of course he does. Certainly the Minister of State does, otherwise he would not be embarking upon the proposals that he has given notice of tonight.
Another abuse is widely practised and I am not sure that I know the answer to it. I am, however, entitled to ask the Under-Secretary about it. It is the abuse of window-dressing, an oft-practised abuse in the City. Section 149 of the Companies Act requires every balance sheet and every profit and loss account to give a true and fair view of the state of affairs of a company at the end of its financial year. There are exemptions, and I believe that quite considerable abuse is based upon them. Window-dressing, by and large, represents a deliberate subversion of the purposes of section 149. That view is widely shared. It has become a sort of hallowed practice in the City, and has also become a cloak of real abuse. We need to examine afresh the operation of that section, and I should like to know whether the Government have any proposals in that regard.
I come next to insider dealing. I have dealt very largely with our objections to the way in which the Government are handling that. I entirely agree with the Government that it is necessary to make insider dealing a criminal offence. The


Government hold that view in spite of the prejudices of the Secretary of State who, in our earlier debate, said from the Opposition Front Bench
I have made it clear that my prejudices lie against making this"—
he was referring to insider dealing—
a crime."—[Official Report, 20th November 1978; Vol. 958, c. 958.]
I hope that the Minister of State has been able to overcome the prejudices of his senior Minister. Insider dealing is an abuse which needs to be deterred by the force of criminal law. After all, many other countries have introduced measures to deal with it. They are draconian but they have not apparently had the horrendous effects to which Conservative spokesmen alluded during the Committee stage of our Bill. Such measures have not managed to deter legitimate trading. I do not believe that we should take steps to deter such trading, but equally I do not believe that the proposals that we introduced would have had that effect. We shall most certainly scrutinise the consultation document proposals with care.
I welcome the last-minute conversion—at least in principle—of the Under-Secretary and his right hon. and hon. Friends. We shall do with this Bill what the present Secretary of State promised in his speech from the Opposition Front Bench on our Bill. We shall do our best to improve it, and we shall try to do so constructively. However, we still await the decision which is urgently required from the Government during this debate in answer to the questions that I postulated in my earlier remarks.

Mr. Edward du Cann: Will the hon. Gentleman allow me to make this remark? I have no objection to his quoting me. I shall take responsibility always for those things for which I am responsible. I approve of the quotation he made. But if he wishes to write or speak about the history of those days, may I invite him in future to do so in a non-partisan, non-selective and wholly fair way?

Mr. Davis: I did not think that I was in any way unfair to the right hon. Gentleman. I cited two basic facts about him. The first was his remarks to the Dowgate committee, which he accepts. The second was that he was the chairman of Keyser Ullmann at a time in the history

of that secondary bank of which neither he nor others could, with hindsight, be very proud. They made many mistakes, and he would not deny that. They undertook a number of activities which hardly lent credit to the good name of Keyser Ullmann at that time. If the right hon. Gentleman wishes to refute that, he will have the opportunity during this debate to do so.
I hope that the Government will be able to satisfy our anxieties during the course of the debate. It would be helpful if at some convenient time the Under-Secretary or the Minister of State were able to intervene to indicate the answers to those questions.

5.48 p.m.

Mr. Graham Page: The Bill is a disappointment, but not for the reasons set out by the hon. Member for Hackney, Central (Mr. Davis). It is a disappointment because in its reform of company law it does not do what is necessary at present to provide proper corporate status to the smaller companies that now desperately need a reform of company law.
As the explanatory memorandum tells us, this is merely a Bill to implement the second directive on company law. I appreciate that we are under an obligation to write that directive into our law. We were under an obligation to do so before the end of last year, but we are in good company with the other member States—apart from Germany which has, I believe, legislated on this matter—in not having got round to it yet.
But we are under no obligation to go further. The opening sentence of the second directive states:
The co-ordination measures prescribed by this Directive shall apply to the provisions laid down by law, regulation or administrative acton in Member States relating to the following types of company".
Then are set out the various types of company. The last under "United Kingdom" reads:
the public company limited by shares,
the public company limited by guarantee and having a share capital.
In both cases a public company is referred to, and therefore it does apply only to public companies. Incidentally, when it says that it applies to public companies limited by guarantee and having a share


capital, the Bill goes on to say, in clause 1(2), that no such company shall in future be created. Strangely enough, the Bill goes on to set out, in part II of schedule 1, a model memorandum of association for exactly that type of company.
That is a diversion, because my reason for calling attention to article 1 of the second directive was to show that we are free to reform our company law on private companies, and not necessarily to apply to them the second directive or, indeed, some of the other directives. We are free to reform private company law on condition that we call a public company something funny to distinguish it from others. We therefore choose this strange connotation PLC, which sounds rather like a plastic material of some sort. I do not think any of us will ever get used to those letters after the name of companies.
We may be under an obligation to the EEC to write its directive into our law, but are we not under just as great an obligation to the 700,000 or 800,000 private companies or small businesses that are either already registered as private companies, or wish to be so incorporated, to produce a form of incorporation suitable to their needs and relieve them of those burdens of company law which were intended only for substantial public companies offering shares to the public? Until 1967 we recognised that those burdens did not have to be placed on small companies. By law, we had the exempted private company. In 1967 we abolished that type of company but we put nothing in its place. To use the full weight of company law in order to regulate small private companies is to use a sledgehammer to swat a fly.
It is grossly unfair that we have imposed for so long unnecessary duties on small businesses that desire the protection of limited liability. I am glad that that has been partially recognised in this Bill. For example, I notice that the strict rules for payment of shares before allotment do not apply to private companies, nor does the requirement of an independent expert report if shares are issued for other than cash. There are one or two other requirements that give exemption to the private company.
There are three requirements in the Bill which do apply to private companies—directors must not issue shares without the authority of a general meeting; when issuing equity shares they must first offer them to existing shareholders; and companies must not acquire their own shares. I doubt whether any of those restrictions are appropriate or necessary in the case of a small private company. The Bill is therefore a disappointment in that it fails to deal with those impositions on the small business which has become incorporated.

Mr. Parkinson: I am very interested in my right hon. Friend's remarks. We did consider his first two points—the protection of the minority shareholder and the need for a general meeting to increase the capital of a private company—very carefully. We are anxious to encourage the ownership of minority holdings in private businesses and to encourage private investors to invest in those companies. We felt that it was not an unreasonable protection for the private investor to have pre-emption rights if he were to become a minority shareholder in a company which might be very much under the control of the managing director, the majority shareholder. We gave a great deal of thought to that, and on balance we felt that there was a case to be made for giving the minority shareholder protection.
As I mentioned in my opening remarks, we hope that it will be possible to come forward with proposals which will meet my right hon. Friend's third point. I agree with him that these are three very important points, and we treated them as such.

Mr. Page: I am grateful to my hon. Friend the Minister of State for his remarks, particularly on the third point. When we are in Committee, perhaps I shall be able to persuade him to change his mind on the first two points. No doubt we shall have a debate on them there.
I had hoped that the Bill would pave the way for the future relief of private companies. All that we are given is a hope from the Green Paper that they may be relieved in certain parts of company law. To some extent a relief is


given by the Bill. By its new classification and definition of public company about half of the 16,000 public companies will become private companies, and be required to re-register as such.
Turning to the Green Paper, I look forward to the next Companies Bill, which will create a three-tier classification. I am not sure that I do really "look forward to it". I do not know what we are letting ourselves in for. I hope that in our debates on this Bill we shall not mortgage our future to the three-tier division forecast in the Green Paper, Cmnd. 7654. The difficulty I see is that over the next two to three years there will be an elaborate re-registration of half the public companies into private companies, and a traffic the other way as well, which will entail considerable work in the offices of the companies.
I wonder whether there will be any relevance at all in the registration of a public company or a private company. What then will be the distinction in law? In part of the law—accounts and disclosure—the three-tier classification will apply. In other parts of the law the two-tier difference between public company and private company will presumably apply. A company may find itself a PLC for the purpose of the second directive, the 1979 Bill, registration, capital maintenance, and dividends, but a middle-tier company for the purpose of the fourth directive, the 1981 Bill and accounting and disclosure. We should look to the future and decide what division we shall have in company structure. If we are to have different divisions for different obligations, the law will become increasingly complicated and complex.
That leads me to one of my hobby horses. If company law becomes more and more complex, it is all the more essential that company secretaries are properly qualified. It is astonishing that we have allowed the secretaries of substantial companies to advise directors on the difficult duties and responsibilities of directorship without having the slightest qualification for so doing. Many company secretaries have good qualifications, but there is no compulsion. Many company secretaries who have no qualifications are dealing with matters affecting hundreds of thousands of people, many more than the clientele of a solicitor or

accountant who has to be properly qualified.
I have said that to me the Bill is a disappointment. It must be more than a disappointment to those of my right hon. and hon. Friends who were members of the Standing Committee that considered the 1978 Bill that was introduced by the previous Administration, over 24 sittings and for about 60 hours. I did not have the honour to be a member of that Committee. However, I have observed the tremendous work done by those who were there on the then Opposition Benches. I do not believe that every matter argued by the then Opposition in 1,226 columns was bad, but I can find very few of those matters in the Bill. In some instances the then Ministers admitted that the arguments were good and would have to be reconsidered with a view to amendment of the Bill at a later stage. Even those matters have not found their way into the Bill.
I offer two small examples. The first, is in clause 17(10) which includes "enactment". It was thought that "enactment" might refer to foreign law and that if it did it would alter substantially company law and practice in the vesting of shares. When that was raised in Committee the Minister said that it was a good argument that should be considered. However, that argument has not been recognised in the Bill and the clause remains the same.
Secondly, clause 22(1) states that a
public company shall not allot a share to any person unless not less than one-quarter of the nominal value of the share together with the whole of any premium has been received by the company".
In Committee there was a debate on what was meant by "shall not allot". If it is necessary to obtain the money before allotment, it will throw chaos into allotments. Surely the company allots the shares, receives the money and then issues the shares. It was argued that the word should be "issue" and not "allot". Again, the Minister said that it was a good point that should be considered. However, we still have "allot". There are many other instances where the Bill has not been revised although strong and good arguments for reform were advanced in Committee by my right hon. and hon. Friends who were then in Opposition.
I do not think that my hon. Friend the Under-Secretary of State can expect the Bill to receive consideration in Committee without debate. Indeed, that applies even to the first part. If no debate is initiated on the first part by the hon. Member for Hackney, Central, it may come from Government Back Benchers.
Company law presents a terrifying prospect. I do not mean that the proceedings in Committee present a terrifying prospect. My comment goes beyond that. There are no fewer than eight EEC directives on company law. We are dealing with only one, the second. Over a period we shall have to introduce eight directives into our company law. I fear that our great-grandchildren will be amending company law to bring those directives into operation. I thought of asking my hon. Friend when he proposed to introduce a consolidation Bill. I do not think that that will be possible in the foreseeable future as we press ahead with trying to introduce eight directives. No doubt even further EEC directives will have to be incorporated in our company law.
The Bill is necessary if not entirely satisfactory. It is a necessary step, but I hope that we shall not stumble on it on the way ahead.

6.7 p.m.

Mr. Donald Anderson: There is a danger of outsiders—by outsiders I mean all Back Benchers, as the two Front Benches were aware of the changes that the Government are proposing to introduce—being wrong-footed. We know that the Bill has been described as a minor measure, a technical measure, a precursor to the major Bill that was to be introduced later in the Session to deal with more controversial issues. However, we have been told by the Minister that the Bill will be amended to go beyond mere implementation of the EEC second directive. We know that the Government propose to introduce a number of amendments in areas that have been described, although the details have not been spelt out. We are clearly in some difficulty.
Why has there been a change of mind on the part of the Government? Is it a recognition of the urgency of some issues—especially insider trading—that have recently been brought to public notice as

a result of a number of inspectors' reports? To be more realistic, it is due to the pressure of the Government's business managers, who no doubt recognise that the legislative timetable is getting extremely full and that there will be no time during the rest of the Session for the introduction of another major Bill on company law reform. Has that led the Government to tack on to the Bill the various matters that need to be tackled at a fairly early stage?
Whatever the Government's motive, it is welcome that a number of the criticisms that were made of this minor, technical Bill in another place have been accepted by the Government and that moves have been made to deal with some matters.
I noted that the Minister mentioned that the financial limits for information are to be increased. The hon. Gentleman gave details. I hope that when he replies to the debate he will say whether the revisions go beyond adjustment for inflation or whether there is a motive of taking a larger section of information away from the need for disclosure.
It is fair to say that the work that was done on the 1978 Bill during 24 sittings in Committee will not be entirely wasted. I was interested by the comment made by the right hon. Member for Crosby (Mr. Page) that the prospect of a consolidation measure for company law recedes into an ever-distant future because of the number of EEC directives that have to be implemented. It is true that company law reform is being enacted piecemeal. We note in schedules 3 and 4 the number of amendments and repeals that are necessary to and of various company law statutes, especially the 1947, 1967 and 1976 Acts. It may be helpful for the Government to consider a degree of consolidation of the vast number of company Acts on the statute book.
The major issues, in addition to the implementation of the directive, were touched on by the Minister in his opening speech. It is difficult to take fully on board what he said about employee interests and what was being done. Perhaps that could be set out more clearly. The Opposition believe that the stake of an employee in a company is normally, by its nature, greater than that of the individual shareholder.
As to the fiduciary duties of directors, I thought the Minister said that the Government had decided against including clauses spelling out the extent of such duties, on the ground that it would lead to a degree of inflexibility. However, the Jenkins report, in 1962, argued that at least general principles in this area should be set out. Perhaps the Government will reconsider that point.
The Minister's most important remarks touched on the question of insider dealing. It is difficult to understand precisely the nature of his undertaking. Did he say that there might not be time to include in Committee any new clauses on insider dealing as the consultation process would take too long and the Government might have second thoughts on their cockshy or initial draft clause because of the comments made on it? At the end of the day we may be no further forward as a result of what the Minister said today, in view of the factors that I have mentioned. That makes it difficult for the Opposition to make up their mind on the matter, as the undertaking may not be a substantial one if there is nothing on insider trading when the Bill becomes an Act. Perhaps the Minister will clarify that matter and set out rather more clearly the problems of the definition of insider and the nature of the dealings that the Government have in mind. On any basis, the spate of recent inspectors' reports has led to less confidence in City institutions. The Government's plan to leave a wide area to self-regulation cannot be well-founded in the light of the experience of company dealings over the past year, as revealed by inspectors' reports.
The Bill and any measures seeking to implement further EEC directives will impose new and increased duties on Companies House. The employees in Cardiff have said that the effective discharge of their duties in respect of companies Acts bas already been put at risk as a result of the cuts in their manpower requirements following the Government requirements. They made representations via my hon. Friend the Member for Pontypool (Mr. Abse). Perhaps the Minister will confirm that such anxieties by employees at Companies House have been allayed or say what action the Government propose to take in an effort to allay them.
Clause 47 is a key provision. No doubt it will lead to considerable litigation. It is aimed at the protection of minorities. However, I am not sure that there is any case for the inclusion of clause 47(4). Clause 47(3) states:
If the court is satisfied that a petition under this section is well founded it may make such order as it thinks fit for giving relief in respect of the matters complained of.
Clearly that is a wide discretion available to the court. Clause 47(4) states:
Without prejudice to the generality of subsection (3) above, an order under this section may",
and it then sets out what the order may contain.
Effectively, the Government have a choice. Either they leave the discretion completely unfettered, without illustration, or they set out a number of administrative examples of what the court may do. The problem is that by citing those examples the courts tend to look at the general area covered by examples and are reluctant to go outside.
Clause 47(4) overlooks the possibility of financial compensation by other members as well as by the company. A company may be insolvent or used for fraud. The controlling shareholders—those with a majority interest in the company—may be siphoning off assets to a company under their 100 per cent. control without regard to minority interests. If there are to be illustrative examples, it should be made clear in clause 47(4) that in appropriate cases financial compensation by the members would be within the discretion of the court.
I am not convinced that we need set out illustrative examples, which, by their nature, tend to cut down the discretion of the court whatever may be said about the generality of the discretion involved.

6.17 p.m.

Mr. Anthony Grant: The response of the official Opposition to the Bill as expressed in the remarks of the hon. Member for Hackney, Central (Mr. Davis) was churlish, rather dog-inthe-manger and niggling. I understand that—he would have liked to bring in the Bill himself. However, his attack on my right hon. Friend the Member for Taunton (Mr. du Cann) was shabby. My right hon. Friend can well look after himself, but I wanted to say that I hold


him in high esteem. I believe that the majority of Members on both sides of the House similarly esteem him.
The concept of limited liability, which has been with us for well over 100 years, is essential to the development of industry and commerce, on which we depend. All of us would be very much the poorer—this applies to employees as well as to employers—but for the development of limited liability. Of course we recognise that it must be controlled and adapted to modern circumstances as they evolve.
Apart from the monumental 1948 Act, and to a lesser extent its smaller brother, the 1967 Act—on which I spent a long time in the House—since the war, we have proceeded in company law reform by a serious of hiccups, prompted, in most cases, by scandals. As a result little progress was made.
The 1973 Bill, with which I was concerned, foundered, alas, on the rock of the 1974 general election. The Labour Government's measure foundered on the rock of the 1979 election. With that uncertain, jolting, history of company law reform in mind, I congratulate the Government on introducing the measure at such an early stage of this Parliament.
It is a pity that the directive of the EEC has been complied with fully by only one other nation—West Germany—although I understand that Holland is at present engaged in company law reform in accordance with the directive. Many other countries have yet to do so, but that is no excuse for us to lag behind on these technical matters, because we ought to be setting a lead within Europe. We frequently—and with justification—claim that our institutions in the City of London and our operations in the commercial markets are the envy not only of the EEC but of the industrial world. We have a responsibility to see that our company law and institutions are properly in tune with modern international requirements.
As the Minister said, the Bill is only a first and technical step. Like my right hon. Friend the Member for Crosby (Mr. Page), I look forward rather eagerly to the second stage. Indeed, I should have liked some of that second stage to be tackled at this time. However, I am prepared to accept the assurances of the

Government—I know that they will fulfill them—that they are determined to embark on this course and will in 1980 introduce a second Bill.
In particular, I should like to see revived—I am disappointed that it is not in the Bill—the concept of the proprietary company, with the new attitude to small firms which was successfully brought into the previous Government's Bill by my hon. Friend the Member for Gloucestershire, South (Mr. Cope) who now reposes in splendid silence on the Government Benches. This was a great success. It was very much needed and it particularly pleased me.
Being rather longer in the tooth than my hon. Friend, I recall that as long ago as 1967 I tried to do something similar. I conceived the idea of a family company. It foundered either in Committee or on Report. Everyone thought that it was a good idea but that it would not work. My hon. Friend was much more successful in that respect. The idea was to liberate the small family firm—which is the basis of much of our industrial activity and is so important for the future development of our country—from some of the most appalling and complex shackles imposed by our company law. Although I am sorry that this concept is not in the Bill, I look forward to its emerging in the next one. The Green Paper recently published by the Government demonstrates their determination to have a discussion of these problems. I am glad to note that the idea of introducing a three-tier classification of companies emerges.
If I were asked at this stage to make one suggestion to the Government, I would beg them not to make the limitations too small. The idea they put forward is that the third tier, the really small proprietary company, should have a turnover of less than £1·3 million, a balance sheet total of less than £650,000, and fewer than 50 employees. I wonder whether this is a little too low. There are many companies which, though very small, deal in valuable equipment that can quite easily produce a turnover of more than £1·3 million. This may be the sort of small company that the Government and I have in mind. But in the main most of the companies are husband and wife affairs, and the board meeting usually takes place over the breakfast


table. It is ludicrous that they should be involved in the same sort of panoply as the multinationals. I welcome the start that the Government have made in this respect. I beg them to continue with it and to demonstrate by their legislative actions that the words they have uttered so wisely and so bravely about small firms and their importance for the future will be backed up by Government action.
I am glad that the Government have decided to involve insider dealings in the Bill, because this is a matter of immense importance. There is general agreement on each side of the House—and certainly among the overwhelming majority of responsible companies and institutions in the City—that something has to be done about it, but it is important to get it right. My right hon. Friend the present Minister of Agriculture, Fisheries and Food grasped the nettle bravely and for the first time in 1973, when he sought to bring in legislation to deal with this problem. I can remember how enormously difficult it was, and I tremble when I think of the lengthy Committee stage that we would have had but for a general election in that year. I am by no means certain that we got it right then. I do not believe that the previous Government got it right in 1978. I have not had the chance to study the consultative document, but I hope that the Government have now got it right and that it will be possible to get a really effective proposal agreed in time for it to be incorporated in this statute.
Insider dealing is a scandal. The fruits of villainy can be of such enormous extent as to make the Great Train Robbery seem like the work of a minor pickpocket at a football match. The net should be cast wide enough to deal with very speedy operators and predators. On the other hand, it should not be cast so wide that it catches small fry, worthy minnows, who should not be caught in its net. That is why the drafting of the clauses concerned with insider dealings is so very delicate, difficult and important.
I am glad that the Government have not gone berserk, as the previous Government did, on the question of employees' interests. There is a great deal of misunderstanding on this aspect. We are, after all, living in 1979 and not in 1879. Indeed, some might say that the evidence is that in recent years, far from

the ruthless employers and company directors bullying the employees, the position has been rather the reverse. Slightly nervous and jittery boards of directors have yielded to the bullying of their employees, much to the detriment of their shareholders. That is the trend these days.
Apart from that, there has been a mass of legislation of all sorts to look after employees' interests—health and safety at work, employment protection, redundancy, unemployment, and so on. We are knee-deep in legislation to look after employees, and I have very grave doubt whether it has any applicability, except as pure window dressing, to company law reform. No board of directors of any repute—and most boards are of repute—will ignore the interests of its employees, because it depends upon them. I have very grave doubt whether putting in some window dressing clauses will make any difference to the present position.
There are three aspects of the Bill which merit further consideration. They can be pursued further in Committee but the Minister might like to take note of them now. Clause 15 prohibits private limited companies with a share capital from offering their share or debentures to the public. This is obviously right. But we are moving into the two-tier or three-tier classification. A great number of previously public companies will be private companies and a great number of companies will want to bridge what used to be called the Macmillan gap. I refer to the position in which they find themselves when they have reached the end of their bank finance, want to expand further, and have not quite reached the stage of going public.
Sometimes there are possibilities of shares being allotted to a limited circle—a small market—with the approval of the Stock Exchange, as an initial halfway house to a company becoming public. I should like the Minister and his Department to be certain that clause 15 will not prove an impediment in some way—I am sure that it will not—to natural growth and development from third-tier to second-tier to first-tier companies.
Clause 17, on pre-emptive rights, poses certain problems, which were recognised last time for companies with overseas


shareholders. For example, ICI has overseas shareholders in America. There are many complications in complying with this requirement in the United States. The practice there has been to sell the rights to United States shareholders and to credit them with the proceeds. That practice will no longer be possible under clause 17. This matter was discussed in Committee last time and the then Minister accepted that something should be done about the problem. However, as far as I am aware, no one has come forward with a solution. Perhaps the fertile fresh minds of my hon. Friend and those in his Department will produce a solution to that problem, if they have not already done so.
In clause 22, which has been touched upon by my right hon. Friend the Member for Crosby, we have the vexed word "allot". No one seems to understand what its effect will be. Certainly it is not a very precise term. The time of allotment is not always clear. The allotting of shares can occur some time before the shares are issued. Again, I understand that Ministers accept that the word "allot" is not entirely satisfactory, but no one has yet come up with a solution. Perhaps one of my more subtle hon. Friends may resolve this question in Committee.
The only other point on drafting concerns clause 47, which has been touched upon by the hon. Member for Swansea, East (Mr. Anderson). It is essential to protect minority interests. In the past—certainly in the last century and before the 1929 and the 1948 Acts—there was the most appalling abuse of minority interests in companies by unscrupulous operators. Many misfortunes were sustained by people who could ill afford them. Therefore, it is right to protect minority interests, and that has been the course of legislation. However, I wonder whether we can overdo this matter. Is there not a danger of clause 47, as it stands, becoming the "Open Sesame" to the vexatious litigant—the crank with a bee in his bonnet—to disrupt the activities of an honourable and worthwhile company. We all know of the person who is bent on pursuing a lunatic goal regardless of the interests of the majority of his fellow shareholders.
Everyone has a right to issue a writ in a court of law. Some people abuse that right and have to be branded as vexatious litigants, and such people have to obtain consent to issue writs. I wonder whether some means could be found to restrain an individual—a crank—from pursuing a narrow point of no relevance to his fellow shareholders. I commend that thought to the Government. Indeed, I wonder whether the old clause 210 was adequate in that respect. However, that is largely a Committee matter.
I have always fervently believed in the concept of wider share ownership—I was one of the founder members of the wider share ownership movement—but successive Governments have paid only lip service to that concept. Wider share ownership would provide a valuable bulwark against the ever-encroaching powers of the State; it would go beyond mere encouragement of commercial activity and provide a bastion of freedom. We want greater dissemination rather than concentration of ownership in the hands of the State or great institutions. If that is to be attained, as the Minister of State rightly said, small investors who would engage in this activity must have confidence. They will not have confidence unless they are satisfied that the law, as it operates when they wish to invest their savings, is adequate to protect them. That is why the Government are right to insist upon the tighter control of public companies and greater disclosure and revelation of information by large companies to the broad mass of people who may become investors in and owners of those companies but at the same time to liberate the important small sector, which is utterly different, from the shackles restraints and bureaucracy which are at present imposed upon it.
I commend the Bill in principle to the House and wish it a speedy passage through our legislature.

6.37 p.m.

Mr. Bruce George: I contribute to the debate with some trepidation. I do not speak as an insider in the affairs of companies. Indeed, the hon. Member for Harrow, Central (Mr. Grant) and I shared the experience of participating in the Parliament and Industry Trust. That certainly gave me an insight into some of the problems of


industry. I speak if not as an unbiased observer, because of my commitment to the Labour Party, at least as someone who does not have enormous inside knowledge of the way in which the system operates. I hope that by speaking in the debate today I shall not be propelled on to the Committee. Perhaps I shall be able to induce the Whips to exclude me from membership of the Committee. I could not face a lengthy period on a Committee of such a nature.
My purpose is not at this stage to comment on the fact that this is yet another piece of legislation from which it appears that we are dancing to the tune played by the EEC. My worry is not so much what is in the Bill, but what is not in it. For example, it appears that there is no need for directors legally to take account of the interests of employees. I shall not rehash the arguments over the Bullock report on industrial democracy, but we are now moving into an age in which a company must be seen as a system in which one part is dependent upon another. If all parts do not function interdependently, the system will grind to a halt. The days when the work force could be regarded as mere recipients of orders from above must come to an end. It is in the interests of boards of directors to recognise that the sooner they incorporate the work force into the decision-making process the better it will be for production and the greater will be the harmony within industrial enterprises.
I am not satisfied, either, with the provisions about loans to directors. We have seen instances rather close to home of abuse and potential abuse. This omission should be remedied in Committee.
The greatest omission concerns insider dealing. There are hopeful signs that this deficiency will be remedied, but it is difficult to comment on what the Government are contemplating because they are keeping this matter very close to their chest. The exclusion of any provision prohibiting insider dealing is hardly surprising from a Tory Government. In the past they have never been prepared to sacrifice the interests of their principal financial backers.
Insider dealing is insidious and pernicious. Indeed, not only is it morally

reprehensible but surely the time will come when it will be a crime. It is a form of theft which claims, in each instance, not one identifiable victim but a countless—often dispersed and unidentifiable—number of victims. Not only is insider dealing grossly unfair, particularly to investors and shareholders, but it threatens to damage even further public confidence in company directors and the securities industry as a whole.
The practice of insider dealing is detrimental to the national interest and not simply to companies and shareholders. The City company law committee, in 1974, emphasised the great dependence of this country on invisible exports, to which the City is obviously a major contributor. Paraphrasing the report, it said that it is vital, in the national interest, that both the high standards and the reputation of the United Kingdom securities market should be maintained. There is, in the public interest, a need for these high standards to be maintained. I believe that the present system of seeking to control insider dealing by self-regulation, though it may have served reasonably well in the past, should come to an end, by the creation of some form of public regulation.
In the past, perhaps the Conservative Government have justified exclusion of clauses dealing with insider dealing with the excuse that they would legislate in another Companies Bill at some time in the future. I hope that as a result of reanalysing the information available to them they will come to the conclusion that legislation is imperative and that criminal sanctions must be imposed on that minority which seeks to abuse the system for its own financial gain.
There are many in this House, and certainly outside it, who have been pressing for decades for control over insider dealing. I hope that it will certainly be less than another 20 years before legislation gets on to the statute book. The route to the control of insider dealing is strewn with disaster.
It is hard to determine the extent of insider dealing. There are those who argue—probably I would come into this category—that if there were much closer scrutiny it could open a can of worms. There are numerous instances, not just of major companies, where there has been


clear abuse, and in a number of cases there has been criminal abuse. There are also many instances of abuse by smaller companies, though less well publicised.
That does not mean that we on the Opposition Benches believe that there are not considerable complications in drafting legislation dealing with insider dealing. The aim of legislation must not be to inhibit market transactions in any way, but simply to deter potential wrongdoing.
As someone who believes in a mixed economy, I believe that there must be a healthy private sector alongside a healthy public sector. As a member of the Labour Party, obviously I would like to see a healthy public sector expanded. In my view, insider dealing raises, for many people, an image of the way the system operates. It may be real or it may be imaginary, but certainly it is something that those within the system—I am not one of the greatest defenders of the system—believe has to be acted upon very quickly.
Looking at previous debates, one sees that some in the Conservative Party have said that the reason why legislation should be delayed is that there is a need to make sure that a number of conditions are fulfilled. I should have thought that the proposals of the previous Government answered many potential criticisms, such as the need for a proper definition of "insider" and the need, quite clearly, to allow the proper provision of information—particularly to employees—though, naturally, any legislation must not inhibit investment activity. I should have thought that the previous Government's proposals met those criteria. I hope that the present Government, now that they have the prospect of legislating, will take advantage of it.
The recurrent argument against insider dealing is that it will inhibit legitimate stock exchange activity. However, if one looks at the American example this argument, I think, is undermined. In the United States the law on insider dealing is extremely tight—infinitely tighter than in this country. The provisions in the United States go much further than were contemplated even by the previous Government. That does not mean that there has been reluctance on the part of investors in the United States to invest. Indeed,

the number of prosecutions undertaken in any one year would, I think, either convince one that there is not a great deal of skulduggery taking place in the United States regarding stock market transactions, or that public control will not open the hornets nest that many opponents of insider dealing fear.

Mr. Renton: It is interesting that the hon. Member for Walsall, South (Mr. George), cites the example of the United States. Has he any evidence that the strict rules against insider dealing in the United States have led to any lessening of insider dealing?—[An HON. MEMBER: "How would one know?"]—Someone asks "How would one know?" That is precisely the point. We go into this example of the United States not knowing. I suspect that the fraudulent and really dishonest, who are determined to use their "insider" information to deal dishonestly, will continue to do so and will still get away with it no matter what legislation there is.

Mr. George: If one accepts the argument that because legislation might not catch everyone who commits a crime therefore one should not legislate, the statute book would consist of about six pages. It is important to define legislation in such a way that transgressors are identified and punished. What worries me about the present system in the United Kingdom is that the sanctions are nowhere as severe as they should be. A public or private wigging from the headmaster in his study is not sufficient penalty for the severe crime—at the moment, moral crime—of theft in the form of insider dealing. Really, it is a gross form of theft. The present system has some virtues. I am not so dogmatic that I cannot see the strong arguments that are legitimately advanced for self-regulation. However, sometimes I wonder whether some of those who are arguing vociferously against legislation are not simply using legitimate argument to mask, in some cases, more sinister motives.
I accept the argument that has been put forward that there are virtues in self-regulation, that if we embark upon criminal sanctions we shall not catch everyone, but that is no excuse for not legislating. The City not only has to be clean but has to show itself perfectly


clean. The criticism of self-regulation, whatever form it takes, is that it is another form of public relations.
It is ironic that a country such as the United States of America, the citadel of free enterprise, is far more regulated, when it comes to industry, than a country supposedly strangled by Socialist bureaucracy. If one goes to America and looks at the various State regulatory commissions, one sees how they regulate the security industry, morticians, hairdressers, chiropodists, and how, they regulate not just the small boys but the big boys. Listening to the arguments of those who assume that the United States, because it is supposedly a free enterprise society, has weaker laws and regulations than the United Kingdom, is amusing. If we look not just at the Stock Exchange but at industry in general, in my view, we see that we have an obsession with self-regulation. Somehow it is imagined that if we let the boys put their own house in order that is superior to public involvement.
I have a particular parliamentary interest not with the securities industry but with the private security industry. That epitomises the conflict which takes place between those who argue for self-regulation of this important "alternative policing" industry and those who argue for public involvement and control. Very often, self-regulation is preferred by certain industries and professions if they are threatened with public regulation because the public are dissatisfied with the way in which they are conducting their affairs.
In my view, that is the reaction of the accounting profession in the light of evidence of irregularities. It is also obvious in the case of the newspaper industry as well as the advertising industry. When the public are angry at disclosures, the accounting profession seeks to appease public opposition by presenting a scheme of self-regulation. Self-regulation denies public involvement. Self-regulation is a public relations exercise, because no one but the participants has any interest in this system. It is all very well to appoint a lord to head this self-regulatory agency and to appoint a few people purporting to represent the public interest, but people are not stupid, and they realise that self-regulation has as its prime concern

the interest of that trade or profession and not the public as a whole.
The Stock Exchange has had a number of successes, but in general it has sought to appease public anger by appearing to try to put its house in order. However, what is needed is what has been done in the United States—the injection of a significant element of public involvement. The examples of the Press Council, the Advertising Standards Authority or the Institute of Chartered Accountants add up to a series of toothless watchdogs. Despite the fact that in the past the Stock Exchange has made a valiant effort, the public generally has less faith in its efficacy because it is known to have a system of self-regulation. It would not be possible to catch everyone if the system of self-regulation in the City was ended, but I believe that a step forward could be made in that direction. However, I doubt whether such steps are likely to be made in the immediate future by this Government.
Another irony of the situation is that the Conservative Party's enthusiasm for self-regulation does not seem to extend to trade unions. Here is a classic example where Conservatives believe that self-regulation does not appear to work, because it affects the other side. That point should be made loud and clear. If self-regulation works for the City and in many other areas, perhaps criminal sanctions should not be so swiftly applied to trade unionists, as the Conservative Party appears to be advocating.

Mr. Nicholas Baker: Does not the hon. Gentleman accept that self-regulation in the trade unions has been tried for many years?

Mr. George: It has been tried, and despite press hysteria it has had some successes. But, on the other hand, are we not all guilty—myself as well as the hon. Gentleman—of adducing arguments that may be satisfactory in one case but less applicable in others? I may not be consistent, but Conservative Members are hardly models of consistency either.
Another irony of the Conservative Party's attitude was exposed by Lord Wedderburn in a brilliant speech in the other place on 25 June. It is perhaps unfair to paraphrase his arguments, because he put them much better than I could. He argued that the Conservative


Party was so concerned with the rights of trade unionists that it was keen to allow them to opt out of paying a political levy. Yet, on the other hand, the Conservative Party does not seem quite so keen to allow shareholders the right to opt out of paying contributions to the Conservative Party. I no longer hold any shares. When I was elected in 1974 I quickly sold my £30 worth in British Enkalon so as not to be accused of complicity in the system.

Mr. Jim Marshall: Is my hon. Friend aware that at the end of the previous Parliament a Companies Bill was in Committee and that some of our hon. Friends brought forward an amendment which would have enabled shareholders to opt out of paying contributions to the Tory Party? It may not surprise my hon. Friend to learn that the Conservative members of that Committee seriously held up the passage of that Bill, which is now so dear to their hearts, because they did not want that amendment to be discussed. Therefore, my hon. Friend ought to be aware of the duplicity of motives of Conservative Members.

Mr. George: I did not serve on that Committee, and, as I said before, I very much hope that I shall not serve on the next one.

Mr. Marshall: Nor do I wish to serve on it.

Mr. George: I believe that a shareholder should have rights that are parallel with those of trade unionists. Whenever I drink a pint of Watneys, I deeply resent the fact that I am directly contributing to Conservative Party funds. In purchasing a loaf of bread one is perhaps also contributing to them because Rank Hovis McDougall gave £30,000 to the Conservative Party in 1978. Not every shareholder happens to be a devout Conservative. Why should not shareholders have the same right of opting out of a donation to a political party?
One cannot always expect consistency, except in one respect. The Conservative Party does everything in its power to advance the interests of those who support it. For example, there are tax concessions

to the wealthy and the flogging off of priceless State assets to either indigenous Conservatives or foreign Conservatives. An excellent article in the New Statesman last week said that the Inland Revenue is likely to be a principal target for the Tory axe, particularly
the new and successful Special Offices for detecting evasion.
The article went on:
The five offices … uncover evaders, primarily small businesses, and unincorporated companies. The most recent accounts show that these offices netted £6·5 million in evaded tax and penalties during 1977, when there were only three offices.
At that time there were fewer than 70 inspectors. Therefore, the enthusiasm that we heard at the Conservative Party conference, when the Secretary of State announced that there would be 450 new staff for checking abuses in the DHSS, does not appear to extend to the other side of the economic and social spectrum which has such a close affinity with the Conservative Party.
The New Statesman article added that another section facing the chop was the Inland Revenue's information service, which is part of the management operations division. It said that
one of its tasks is the acquisition of information about property and share transfers and bank and building society accounts. Such information is essential in tax investigations—but it too is a target for the cuts.
People who are in breach of social security law and regulations have every right to expect that the same diligence is applied to people who happen to be infinitely wealthier.

Mr. Bob Cryer: I entirely accept my hon. Friend's point, which has been made on a number of occasions. Will he reflect on the astronomical sums which many directors get away with in companies such as Lonrho, where a detailed and expensive report is presented to this House but no prosecutions are undertaken? That has occurred in company report after company report, yet people involved in minor affairs are prosecuted with the utmost zeal. There seem to be two standards.

Mr. George: This is not the place to go into the philosophy of crime, although some may say that it is. However, if one looks at low-paid industries, one finds that a worker who transgresses may be punished by a fine or possible gaol, whereas an employer who deliberately pays less than the wages council minimum is not hauled into court and prosecuted. He is given almost a pat on the back, warned and perhaps warned again. The number of prosecutions for deliberate underpayment is almost zero. Here is an example of discrepancy in the law, where what is a crime for one appears not to be a crime for another.
My final point is that there is nothing in the Bill that will in any way curtail the massive outward investment that we are currently seeing. When I was in the United States recently, after rather protracted and unsuccessful negotiations with a company to try to get it to change its mind about sacking 1,000 people—sackings which will have a devastating effect on part of my constituency—it was of no comfort to read in The Economist that the company, GKN, was embarking on a massive programme of overseas investment. It is hardly comfort for the people to know that investment is taking place to a very large extent in the United States and Germany.
If there is investment, I wish that it would be directed more inwardly than outwardly. Driving around the United States and seeing, seemingly every 150 yards, a Howard Johnson hotel, soon to become a little part of Britain abroad, I just wish that the Imperial Tobacco Company would invest some of its gains in British industry. There is no point in companies complaining about diminishing British national industrial prospects, when those companies appear to be hell-bent on investing abroad. I wish that we could see in the Bill some incentive for companies to invest in the United Kingdom.
As I have said, the City must not only be clean; it must be seen to be clean. I hope that the Bill, and any amendments to it in Committee, will result in substantial modifications and the creation of a greater degree of confidence on the part of not only workpeople and shareholders but the public as a whole. This

is a major piece of legislation. It is regrettable that not more hon. Members are able to participate in the debate.
I hope that confidence will be increased. There are virtues in parts of the Bill. I very much hope that the Minister and his colleagues will bring forward a serious amendment to it which will outlaw insider dealing and will not be a cosmetic job to convince the House that something is being done. This pernicious evil must be outlawed. I hope that legislation will achieve that objective.

7.2 p.m.

Mr. Tim Renton: I congratulate the hon. Member for Walsall, South (Mr. George) on his very interesting speech. By means of dragging in such red herrings as Howard Johnson hotels in the United States and tax concessions to the wealthy, he has made it very much more likely that the debate will last until 10 o'clock than it was half an hour ago.
However, in the process the hon. Gentleman provoked his hon. Friend the Member for Leicester, South (Mr. Marshall), who served on the previous Companies Bill Committee. Indeed, he was the Government Whip on that Committee. He remarked that the then Opposition side, as my hon. Friends and I were, blocked discussion of the amendment that would have given shareholders the opportunity to opt out of the sums paid by their company to the Conservative Party. I do not remember any such blocking on our part. As anyone who served on that Committee will agree, we had very long, very informed debates on many clauses and subsections of the previous Bill, prior to reaching that amendment. I seem to remember that certain Labour Ministers then got rather restless and thought that the Bill might be lost if we continued detailed criticism of it. Perhaps the hon. Member for Leicester, South, as a Government Whip, played a part in that. Then, at the last minute, was not the amendment withdrawn, or shoved under the carpet? I had thought that it would be very interesting to debate it.

Mr. Jim Marshall: I am always pleased to be mentioned in dispatches, even if disparagingly. However, if the hon. Gentleman looks at the record, he will find—I am sure that the Minister of State would


agree—that it took an unconscionably long time to reach the amendment. That was the gist of my comment to my hon. Friend the Member for Walsall, South. If the hon. Gentleman serves on the Standing Committee dealing with this Bill I am sure that he will be a little annoyed with the present Opposition if we spend as much time discussing amendments as Conservative Members did in the previous Committee. That is not to say that there should not be adequate and fair discussion of all the clauses. However, I am sure that the hon. Gentleman would feel as I did at certain times during the previous Committee—that the then Opposition seemed to be spending large amounts of time discussing this directive and that directive.
They were a very effective Opposition. The Bill was lost. As I have said, it was a Bill that the Minister of State now holds very dearly and wishes to see on the statute book as quickly as possible. But the hon. Member for Mid-Sussex (Mr. Renton) knows in his heart of hearts that the reason why we took so much time in reaching the amendment was that the then Opposition wanted certain understandings between themselves and Ministers as to the Government's intentions in regard to the amendment. It was made very clear that until those intentions were understood, little or no progress would be made on that Bill. If it had not been for that time-wasting, we could have had that Bill on the statute book prior to the general election.

Mr. Renton: Obviously, in his then capacity as a Labour Whip, the hon. Member was aware of some horrible nuances in the Government Whips' Office of which I, as a mere member of the Committee, was not aware. It sounds like insider trading of the worst kind. The end result, as the hon. Member said, was that there was an election and the Bill fell. I think that one ambition I share with the hon. Member for Walsall, South is that having done my duty on the previous Committee I should not serve on the next one.
I start the substance of my remarks by congratulating my hon. Friend the Minister of State most warmly. For me, who sat beside him for so long during the Committee stage on the previous Bill,

it is a very great pleasure to see my hon. Friend not just as my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) but as the Minister of State, introducing his own Companies Bill. That gives us all a great deal of satisfaction. I wish him well with it.
That said, I must join with a number of those who have already spoken in the debate in saying that in some ways the Bill is much more remarkable for what is not in it than for what is. In any approach to company law we must distinguish clearly between unnecessary additional complications, which will simply add to the burdens of business men who are struggling to see that their factories operate profitably and that they have good relations with their trade unions, and necessary reforms in company law. I do not believe that many fundamental changes are required in company law in Britain, but some are required, and I shall come to them in the second part of my remarks.
What I fear is that, by and large, what is proposed by the EEC directives—this includes the second directive, which is what we are really debating this evening—comes into the category of unnecessary additional complications. As I think hon. Members on both sides of the House will agree, this country has got on perfectly well for many years without separate classes of public and private companies. My right hon. Friend the Member for Crosby (Mr. Page) pointed out earlier that in due course we shall have a great number of tiers—large public companies, medium-sized companies, small private companies, and so forth. I fear that these will add to the burden of unnecessary complications on business men.
Really, the only purpose of having a separate private company status is if the separate private companies are given exemptions. These exemptions could be preferential tax rates or special treatment in the distribution of dividends, which would not be available to the larger public companies. They could be extended to allow the report and accounts of the smaller private company to be less detailed than those of the larger public company. Possibly it need not file accounts, or it could have an independent audit review instead of a full audit certificate.
My hon. Friend implied—and it is implicit in the papers published by the Department of Trade—that the exemptions for the small private limited company will be contained in the next Companies Bill in 1980–81, but that is like saying that the right barrel of the gun will not go off until the left barrel has been fired. The important part of this Bill will not be triggered off until the next Bill becomes law. Surely we have heard all that before, notably from the hon. Member for Hackney, Central (Mr. Davis) who is unfortunately not in his place.
On a summer afternoon with the sun streaming through the windows of the Chamber, I remember the hon. Member for Hackney, Central, during the final stages of the 1976 Companies Bill, with the hyperbole to which he is occasionally given, telling us that a grand period of company law reform was ahead. He implied that as long as he was Under-Secretary at the Department of Trade, supported by his colleagues, we should have in every Session a major company law reform measure. Nothing happened in 1976–77, virtually nothing in 1977–78, and not until 1978–79 did we have a Bill that was supposed to be apolitical and impartial. After 24 Committee sittings and 60 hours of debate, when hon. Members were encouraged to tag things on to the Bill and introduce various reforms, it failed and did not reach the statute book. The mountain finally gave birth to a mouse that died with two paws out of the womb. I trust that with all our proposed legislation we shall not perforce follow the same course as the previous Government.

Mr. Peter Archer: Is the hon. Member for Mid-Sussex (Mr. Renton) complaining that we introduced a Bill that was too lengthy or one that was not sufficiently lengthy? When the Bill was introduced, it was talked out in Committee.

Mr. Renton: It certainly was not talked out in Committee. The debate in Committee was extremely informed. My complaint is that the Bill was introduced so late in the previous Parliament. It was the first Bill in three or fours years to amend company law and hon. Members on both sides of the House had many matters that they wished to tag on

to it. That is the interesting and rocky road ahead of my hon. Friend the Minister of State. My complaint against the Labour Government is that they did too little too late and in consequence lost the Bill.

Mr. George: Is the hon. Gentleman arguing that every Minister who introduces a Companies Bill is committing political suicide? The 1973 Bill led to the end of the Conservative Government and the introduction of our Bill saw us off. Is the hon. Gentleman offering us a ray of hope that the same end might befall this Minister and this Government?

Mr. Renton: I do not wish to be thought to be offering the hon. Gentleman any ray of hope, but it is an extraordinary inference, which can be fairly drawn, that it is only necessary for a Government to introduce a major Companies Bill for them to fall.
Certain recommendations of Jenkins necessary to reform company law do not appear in the Bill, although in opening the Minister said that he would introduce legislation covering loans to directors and insider trading. I welcomed that statement because such legislation is essential, but Jenkins made recommendations as far back as 1962 on other matters on which we do not have proposed legislation. There are the duties of a director—that he should observe the utmost good faith towards a company in any transaction with it or on its behalf; his duty to disclose any material interest, direct or indirect, in any material contract or proposed contract, and the disclosure of any arrangements enabling directors to acquire shares. At present there are possible loopholes in those areas.
The Minister did not include two further matters that Jenkins dealt with. The first concerns non-voting shares. Either the law should be amended to ensure that no new non-voting shares are introduced or, over a period of years, companies must enfranchise their existing non-voting shares. The principle of the non-voting share is entirely contra to the fact that a shareholder with only one share can ask questions at an annual general meeting—and that is something that critics of public companies should always bear in mind—he can make a noise, and at the end, if necessary, vote his one share against the


board. Existing non-voting shares should eventually be enfranchised.
Secondly, Jenkins made a number of recommendations about warehousing and nominee names. Since then the level of disclosure for an individual shareholder has been lowered from 10 per cent. to 5 per cent. It is, however, extremely difficult for a public company to find out who owns shares registered in nominee names, and a large proportion of shares in most public companies are held in such nominee names. That may be disturbing to directors and, through them, to management and employees. A shareholder can be building up towards an unwanted takeover bid that the board might not easily discover.
It is difficult to obtain information about who is behind the nominee name if, for example, shares are held in the nominee name of the registrar of a Swiss bank. None the less, companies should be given greater powers of search to find out whether a large block of shares is being secretly built up and who are the beneficial shareholders. Perhaps when the Minister replies to the debate he will give us the Government's views on those two subjects.
The Minister of State has, in effect, trumped all our aces by producing his own insider proposals this afternoon. I have glanced through the paper and I am very pleased with all the consultations that the Minister of State has obviously undertaken since he and I were together on the Companies Bill Committee. At that time we spent a lot of time discussing this matter and trying to reach a correct definition.
I make my next observation in case I am not selected to serve on the Committee. I see from the Minister's paper that he has sought to improve further and refine the definition that he and I and other hon. Friends put forward in Committee. Thinking about it subsequently, I have concluded that far and away the best method of legislating against insider trading is to make it clear in law that any short-term gain taken by an insider on shares that he has bought in a company in which he is an insider, must be paid over to the company. Perhaps the definition of "short term" should be one or two years. The advantage

of this is that most insiders—for example managers or employees of the company—when they have inside information and buy the shares of a company on that basis, can be pretty sure of short-term gain. They know that the news of which they have been informed will put up the shares immediately it is announced. But what they cannot be certain of is that it will have a long-term beneficial effect on the share prices of that company. Therefore, if the legislation requires that any short-term gains realised, for example, over a two-year period, must be turned over to the company, this would in itself be a great financial deterrent to insider trading—

Mr. George Robertson: Gaol would also be a deterrent.

Mr. Renton: Of course. I, too, am in favour of criminal sanctions. I believe that they should be enforced and I have always taken that view. That is not a novel stance on my part. I am merely saying that the financial deterrent would be considerable. We want not only to catch the fraudulent and the dishonest, but to stop others from following their example.

Mr. Parkinson: I am very interested in my hon. Friend's suggestion and dismayed at the news that he seriously thinks that he might not be invited to serve on the Committee. I should be very disappointed if that were the case. Would the company hold the short-term gain? I understand my hon. Friend's suggestion as being that the company should hold the short-term gain as trustee for the shareholders. Or, on the other hand, would it be accountable to the person who had been the victim of the insider dealing? What does my hon. Friend have in mind?

Mr. Renton: I believe that the company should hold the fund as trustees for all the shareholders. If it is a case of buying shares through a stock exchange, restitution to the original seller is actually impractical and impossible. One could take it further and say that the gains should be handed over to the trustees of the company's pension fund and be held by that fund as an unexpected benefit.
I am delighted that the Government do not intend to introduce legislation to


enforce supervisory boards. Judging from some of the remarks of the hon. Member for Hackney, Central, who made a rather intemperate speech, for him, I felt that he was harking back to his wish for legislation on industrial democracy and the recommendation of the ill-fated and badly-advised Bullock committee.

Sir Brandon Rhys Williams: That was a disaster.

Mr. Renton: Yes, it was. It would be disastrous to try to enforce supervisory boards on British companies by legislation. Not only would this lead to enormous legal and administrative costs; it would go against the whole principle that companies in this country must be allowed to evolve their own structure with occasional nods, prods and winks from Government, together with codes of conduct, perhaps. Above all, they must be allowed to evolve their own structure in consultation with their management and employees. They can work out the sort of structure that is best suited to their business, their relations with their trade unions and their future prosperity.

Mr. George Robertson: Will the hon. Member reflect that it is some time now since the Bullock committee produced its recommendations and its analysis of the deficiencies in the management of British companies? Is he convinced that there is evidence to suggest that in the meantime, since the Bullock report sank under a barrage of abuse from the CBI and its acolytes, British companies either in general or in particular, have made any attempt to develop a British-type industrial democracy structure?

Mr. Renton: That intervention is not worthy of the hon. Member, because he knows a lot about these matters, as he has often demonstrated in Committee debates. He knows as well as I do that over the last few years an increasing number of companies have produced annual reports specifically written for and distributed to the employees. Consultations and discussion groups are held with the employees in order to go over the employee reports. Perhaps most important of all a larger number of companies are moving more rapidly towards profit sharing schemes and employee share schemes. I understand that more than 200 now have schemes in existence or have schemes that

are waiting for the approval of the Inland Revenue. That is a great improvement on the situation that existed a few years ago.
Having said that about Bullock and supervisory boards—it is a great relief that the Government do not intend to legislate on this matter—I should like to develop a hobby horse of my own in relation to top management structure. It concerns the position of the chairman and the chief executive. If this provision cannot be brought into the present Companies Bill I hope that the Minister of State will think about it in the next Companies Bill which is only just over the horizon.
I find it absurd that while ordinary directors of a company are not only required, after their first appointment to the board, to come up for approval at the next annual general meeting but must be reapproved every three to five years, the same thing does not happen either to the chairman or to the chief executive. Their approval by the shareholders is simply as directors. This is extraordinary, because the chairman, as head of the board, and the chief executive are by far the two most important members of the board. They are chosen by the board, but they are not then approved or re-selected in their new jobs by the shareholders. I would like to see company law changed in this respect and I should recommend that chairmen and chief executives should be reselected in their new capacities at the next general meeting after their appointment in those jobs. They would have to be reapproved or reconfirmed at least every five years with the necessity of their retirement from those offices at the age of 70.
I make a more contentious point. The chairman and chief executive do not and should not do the same job. They do not carry the same responsibility and they should not be confused in the same person. By definition, a chief executive is in charge of management. His job is to explain and justify to the board the performance of management, how the funds available are being used and plans for future growth. That is not the chairman's role. The chairman's role, as head of the board, is to listen critically to the chief executive and other executive directors, assess what is being done and, if necessary, put on the brakes. His job is also to explain to the shareholders what


the board is doing. The chairman should also act as a conduit, relaying the shareholders' opinions back to the chief executive and other executive directors.
The chairman is the senior shareholders' representative on the board. The chief executive is management's senior representative. The two roles should not be confused. If they are confused, the danger is that the company will become too identified with an individual who is known in the press as "chairman and chief executive". The press talks of such a person as if he owns the company. There are many examples in British business today.
I realise that I am falling into the trap of suggesting yet another layer of definition, but I suggest that for the largest companies, with assets of more than £100 million, or employing more than 10,000 people, the chairman and chief executive should not be the same person. Their roles and identities should be different. The chairman's role should be nonmanagement. He should review and criticise management even if his job is full time.
In addition to the pay of directors being reported in annual reports and accounts, all that is paid to directors by way of expenses should be reported. It should not be shown as a total; what is paid to each director should be shown. That would help the Government decide to what degree business perquisites should be brought back into the tax net.
Full, essential details of a company's pension scheme should also be spelt out in the report and accounts. Contributions to a pension scheme can take up a large part of a company's assets. It would be helpful if a brief report from the trustees of a pension scheme were included in the annual report with comments about the way in which the fund is progressing and an explanation of the degree of inflation-proofing for retired members of the company that a scheme provides.
I hope that this Government will be more successful than the last in bringing into law the necessary, but not the superfluous, changes in company law that I have outlined. I counsel hon. Members not to let the grass grow under their

feet. I hope that the Bill will make speedy progress.

7.33 p.m.

Mr. George Robertson: It is more effective to suppress issues—even those of great substance—by boredom than by direct suppression. This debate illustrates the soundness of my belief. The triumph of boredom over suppression was the hallmark of the progress of the last Companies Bill.
It was my fate, as a new Member of Parliament, to serve for the first time on a Committee as a volunteer on the Companies Bill 1973. There must be some gentlemen, for long in their graves, on the other side of the Iron Curtain who would have listened with interest to the speech by the hon. Member for Mid-Sussex (Mr. Renton) as he outlined the history of the 24 long and painful Committee sessions.
We had long discussions about inflation accounting. One of the hon. Members who held forth so lengthily on that issue is now on the Treasury Bench and is mute as a Government Whip. One can only hope that in retribution for his lengthy speeches he is made the Whip on the Standing Committee on the Companies Bill 1979.
Where are all the other issues which were the subject of intricate dances on the head of a safety pin? Proprietary companies are not to be the subject of the Conservative Government's Companies Bill. We spent much time in delving into inflation accounting but that does not appear to be covered in the present Bill, despite the accumulation of knowledge displayed during the lengthy sessions of the Standing Committee.
Audit committees, which are the particular babies of Government Members, and for which the then Opposition showed so much sympathy, are not to figure in the Bill, although it has been suggested that they should be the subject of a late addition to the Bill.
Company law reform has the ability to empty the Chamber quicker than any other subject. However, if we were discussing frauds in the social security system the Tory Benches would be full. That subject would create a debate of enormous proportion and heat. But, this matter, which involves more financial benefit to individuals than the paltry sums


extracted from the social security system, creates a boredom which triumphs over the suppression of the issues.
I sometimes wonder about the level of political debate. We spend too much time and effort routing out those guilty of minor transgressions, when large-scale fraud is allowed to continue within the law.
Insider dealing is to be outlawed by the Bill. It is a squalid, nasty, dangerous and pernicious practice. The Minister agrees, and some of his hon. Friends have identified themselves with that view. Insider dealing is one of the many unacceptable faces of capitalism that remain within the law. It is a dreadful condemnation of many Governments that nothing has been done about insider dealing.
I am pleased that the Government now intend to do something about it, but in view of the performance by the then Opposition in Committee on the last Companies Bill we are unlikely to see resolute action that will drive insider dealing beyond the pale of the City and its environs.
It is debatable in the City whether insider dealing should be regulated by gentle slaps on the hands by a City panel of those who are caught or whether it should be treated as a criminal illegality. That issue has not been resolved satisfactorily in the City. The Government will come under severe pressure from their political allies in that quarter to make sure that the legislation is much weaker than hon. Members would wish to see.
The dichotomy of interests that exists on the matter was no more amply illustrated than in 1972 when Mr. James Slater, then chairman and chief executive—to coin a phrase—of Slater Walker Securities, wrote a lengthy and influential article in the Financial Times indicating his outrage at insider dealing and its effect upon the reputation of the City of London, both domestically and in foreign markets. From the history of his own business activities we now know that at that time Mr. Slater was involved in running a company called Tokengate Investments, which was described by Mr. Charles Raw of the Sunday Times as being one of the largest and best organised companies involved in insider dealing.
That illustrates the hypocrisy that exists within certain circles in the City. Although I exempt the right hon. Member for Hertfordshire, South (Mr. Parkinson) and the hon. Member for Mid-Sussex from the collaboration that exists with these practices, I hope—although that hope may be in vain—that those hon. Members will be able to triumph over those in the City who still believe that the weakness of self-regulation will drive the practice of insider dealing out of the City and the Stock Exchange.
What is at stake with insider dealing does not compare with the petty crime of fiddling social security or even income tax. Insider dealing is a calculated gamble with people's livelihoods and jobs and with the future of substantial companies in this country. It is remarkable that it is not a crime. If it is to be made a crime, the nature of the crime must be reflected in the penalties that the Government propose in their legislation. It is a major crime, and the penalties must reflect that. It is not simply financial reward that is at stake but the future of companies and their employees. When the Government make their proposals, I hope that they will reflect the severity of the crime.
The major issue that will confront this country in the coming year is that of industrial democracy. The Government now claim that they have no intention of legislating on the issue of supervisory boards. Yet we know that the EEC fifth draft directive on company law, which is presently working itself through the large bureaucracy of Brussels, will eventually oblige this Government, as it would any Government, to produce a legal framework for industrial democracy in this country. I do not share the optimism of the hon. Member for Mid-Sussex about the capacity, wish or desire of British companies to evolve their own system of industrial democracy and supervisory boards that will cope with the demands that will eventually be imposed upon us by the EEC. The EEC will try to impose uniform structures and systems that apparently work extremely well for the other countries in the European Community which are competing successfully against us in many world markets.
Today's debate is all the more interesting because of the speech made two or


three weeks ago by the Secretary of State for Employment. To the confusion of the outside world, he, of course, has no responsibility for industrial democracy. However, he made a speech of substantial interest to those of us who have watched Tory Party policy on industrial democracy. The right hon. Gentleman referred to the legal enfranchisement of the employee in companies. He implied that the existing system of company control in this country was becoming intolerable and that there was something wrong with a system in which an employee with 40 years' service was not consulted in any way if the company was involved in takeover, closure or other major features of its livelihood.
Here we have the voice of the radical within the Conservative Government. Let us hope beyond hope that when the Government come to frame their proposals for making boards of directors responsible for employees' interests they will listen carefully to the advice of the Secretary of State He is making the same point that was made by the previous Government in the Companies Bill: in other words, at this stage in the century, in the evolution of our industrial structure, we have to get away from the idea that employees exist at the whim of a management structure which is responsible only to the shareholders of the company. It will be interesting to see what suggestions the right hon. Gentleman makes to his colleagues in the Department of Trade when it comes to that part of the Bill.
With the greatest respect to the hon. Member for Mid-Sussex, presentations of companies' annual reports have as little to do with industrial democracy as the taps on the hand administered by the City panel have to the outlawing of insider dealing. Even among shareholders annual reports are notorious for the information they do not rather than do show to the shareholder. The hon. Member for Mid-Sussex has suggested a number of ways in which the information could be expanded and made more illuminating. But industrial democracy, supervisory boards, participation and codetermination—call them whatever one likes—are not about the dissemination of information. They are about the involvement and identification of employees in the enterprise.
The Secretary of State for Employment referred to the legal enfranchisement of the employees of a company. I hope that that new philosophy, which seems to be breaking out in the Government, is mentioned not just in one seminar on one afternoon but is taken up by the Government as meaning what they say. I hope that they will do something in this Bill and in this Session to enfranchise large sections of the British industrial labour force which, up to now, has always been the most subservient to the whims of management and the least consulted when even massive changes are to be made in the circumstances of the enterprise.
I have mentioned a number of points to which the Government should pay attention in the control of the Bill and the time that it will take in Committee. We have been promised that new detailed proposals will come forward from the Government in Committee and that they will consider some of the nasty practices that have been suppressed by the boredom which the issue seems to excite throughout the British public. I hope that they will do something radical now to solve many issues of which they are aware and which need serious and detailed attention.

7.49 p.m.

Sir Brandon Rhys Williams: I am just embarking on my second decade as a Back Bench reformer of company law. Looking at this Bill, I am reminded of Robert Louis Stevenson's comment:
To travel hopefully is a better thing than to arrive".
The Bill has 59 clauses and four schedules, but it does not contain many of the provisions that I should have liked to see in it.
Hon. Members may recall that the next line of the passage that I have just quoted is:
and the true success is to labour.
Much of the Bill has the appearance of the measure that we worked on for many mornings in Standing Committee and which originated from the previous Labour Government.
It reminds me of a Member having bought a sandwich in the Tea Room just before the election, not having time to eat it, and discovering it in his locker


today. He would probably feel that it was not quite as appetising as when he first looked at it. I wish that the Bill had more in it to arouse our appetites. Of course, my hon. Friend the Minister of State, whom we are delighted to see as a Minister, has the gift of salesmanship. He has managed to sell the prospect of an exciting Committee stage to an otherwise not very excited House.
There are a number of aspects of the Bill that could be improved and a number of gaps that I hope will be filled. I shall certainly not complain about restrictions being imposed on Back Benchers by the long title, which reads:
An Act to amend the law relating to companies.
That is certainly an invitation to those of us who care to table amendments to give rise to useful consideration of a number of matters in Committee.
Enthusiast though I am for many aspects of company law reform, I have never been able to take a great interest in the numerous proposals that have come before the House for reform in relation to insider dealing. When there is something fundamentally wrong with the engine of a car one does not need to be too concerned about scratches and dents on the paintwork, disagreeable though they may be.
Even if the Government have found the perfect formula on insider dealing, I do not think that it will radically change the basic problem of free enterprise, which is that the limited liability company is not working as efficiently as it should. We may get rid of some surface blemishes and scandalous misdeeds, but the Committee would be wrong to devote too many mornings to insider dealing and not turn its attention to some of the much broader aspects of company law that need urgent parliamentary reform.
However, one aspect of insider dealing that troubles me is the growing difference between institutional investors and small shareholders in the type of information that they can extract from contacts with companies. Even if small shareholders attend company meetings, study publications and read the speeches of leading figures in the company, they cannot find out much of what is going on; but a merchant bank or large investing institution is able to make approaches

directly to the company and to obtain briefings of a highly confidential character.
Although the vast majority of those in the City act with the purest intentions, how can they prevent themselves from allowing knowledge of confidential information that is not available to small shareholders to influence their investment judgment? All too often, the small shareholder finds out that something has gone wrong with a company in which he has his savings after the market has moved because the institutional shareholders have ascertained facts ahead of him that were obtainable by large institutions, but not by small shareholders.
I shall look carefully to see whether the Government's proposals on insider dealing will help to check that abuse. It will be difficult, but I do not like to see the euthanasia of the small shareholder, even though it may be a process which cannot be prevented.
There have been references to inflation accounting. We had an extremely helpful and enlightening debate, in which I took no part, in the Committee on the previous Bill. I am not an accountant and do not pretend to understand the niceties of all the ways in which inflation can be dealt with in company accounts, but we cannot go on as we are.
There are many company managements as well as shareholders and employees, who are living in a fool's paradise. They believe that their companies are profitable, but if they knew the facts and applied inflation accounting to their annual accounts they would realise that they are trading at a loss or are moving into a position of irreversible decline because they are not generating enough money to replace their capital and are not generating enough profit to attract fresh capital. I do not know whether there are scores, hundreds or thousands of British companies living in that fool's paradise, but I know that we must put an end to the situation.
We cannot continue with the delicious debates between professional people trying this nuance or that recommendation at conferences of accountants and seminars of experts that never lead to any conclusion. Someone on the Standing Committee ought to move an amendment to part III of the Bill, which seems to be


the appropriate place—perhaps in clause 45—to include a new definition of profit so that a company is obliged to declare what it is doing about taking inflation into account in its long-term projections.
I welcome the Government's enthusiasm for helping small companies and removing some of the burdens that are time consuming and almost totally fruitless. We have a Green Paper on the subject which includes a definition of the bottom tier. My hon. Friend the Member for Harrow, Central (Mr. Grant) surprised me by saying that he thought that the definition limit was too low. The storm of comment in the press when the Green Paper was published indicated that many thought that the limit under which small private companies would be entitled to exemptions was much too high. Certainly a balance sheet total of £650,000 is, even with inflation, a serious sum. A company with, say, 50 employees is not my idea of a small proprietary business. I think that we shall be opening the door to fraud or, at the very least, to sloppiness if we legislate to excuse such companies from the normal provisions applied to middle-sized and larger companies.
We also need urgent reforms aimed specifically at middle-sized and larger companies. In each Session of Parliament since 1970 I have introduced either a Bill or a series of amendments to a Companies Bill recommending that such companies should have a particular board structure including at least three non-executive directors. I believe that I may have made a little progress with my campaign, because the role of the non-executive director and his potential importance is increasingly recognised.
There are certain other provisions that would be helpful. I am attracted by one small reform that I hope will be discussed in Committee, namely that the names of candidates for directorships should be circulated to members well in advance of the meeting at which the election of a director is on the agenda, together with a reasonable biography or note of commendation by those who intend to propose a man for election. That would enable institutions to collect their proxies and small shareholders to collect their points of view so that the shareholders'

meeting would have a greater degree of reality. The election of directors would be a matter for the shareholders and not simply a procedural device by which the board obtains the election of its nominees, probably without a contest.
I have often sought to draw attention to the managerial revolution in British companies which has produced a board structure quite different from that found in American companies and on the boards of enterprises of a comparable size on the Continent. The vast majority of British company boards outside banking and insurance consist of heads of departments who are regularly engaged in the business. There may be one or two more non-executive directors, but they are rarely people who are in a position to check, control or supervise the work of the executive departmental heads who have taken the title of director.
Companies can go on for all too long as mutual admiration societies where men who have worked with each other over the years have reached the top positions in their companies through what they have learned within them. They may be ignorant of what outsiders are doing and of the ways in which they could improve their own work. They also tend to stick together when things go wrong and to resist the precise form of change that might save their company even it it were indeed a form of criticism of their own previous management records.
In pushing the idea that all middle and large sized companies should have at least three outside directors, I have sought to introduce some kind of remedy by which we grow on what we have and do not crash through to a totally different form of management such as the two-tier board. The inevitability of gradualness is most obvious in top management. The House of Commons would be wrong to try to push change too fast. However, we must differentiate between the supervisory role of the board and the executive role of the heads of department, and to make sure that the board contains at any rate some men of substance and insight who can function in a supervisory role.
Had I, when I began my series of companies Bills, been content simply to require all middle and large sized companies to have three non-executive directors, and stopped at that point, my Bill


would probably have gone through by now. That might have been of some use, but not much. If the non-executive directors are in a minority and have no ready access to the information which they need—and which may be damaging to the reputation of board colleagues—they will inevitably be second rate board members. In each of the Bills that I have introduced—unsuccessfully so far—I have tried to suggest ways in which the non-executive directors, though a minority of the board, might still constitute a real influence.
One way of achieving that might be to require them to make a separate report, which is the beginning of a two-tier board structure. At the shareholders' meeting the non-executive directors would have to appear, at any rate for part of the proceedings, as a body separate from the rest of the directors. I know that that suggestion of mine has caused a lot of heart searching and opposition.
In the last two or three years I have taken a particular interest in what has been happening in North America, particularly in the United States, in the light of the action by the New York Stock Exchange, under pressure from the SEC, in insisting that if a company was to be quoted on the New York Stock Exchange it must appoint an audit committee. Such a committee is the vehicle by which outside directors can have close contact with professional people who have an intimate knowledge of the company and also adopt a particular role within the board which gives them status and influence.
It would be helpful, in the largest British companies at any rate, if progress towards the adoption of the habit of appointing an audit committee were accelerated. Possibly a way could be found of pressing forward towards that without making them compulsory in every case. I am nervous of compulsion, yet anxious to see significant changes introduced gradually.
Possibly the most glaring and obvious deficiency of limited liability companies in this country is the concept that capital and labour are ranged against each other on two sides. One all too often hears the phrase "both sides of industry". If a Back Bencher wanted to introduce a really helpful measure of company law reform, he might introduce a Bill to make it a criminal offence ever to use that

phrase. To recall a famous maxim, there is only one side in industry, and we are all on it. The concept of having two sides is like having an army that is in a permanent state of mutiny, where the officers and men are natural enemies and their only role is to fight matters out among themselves.
If one uses the military analogy it becomes obvious that the "two sides" in the creation of wealth will never get very far. However, in industry we are complacent about the idea that we should roll forward into the future with management and capital on one side and the work force on the other, each the other's perpetual enemy, and each side constantly trying to do the other in.
We therefore need to look at our company law to see whether there are factors rooted in the nineteenth century legislation which we have inherited and which are helping to keep alive the concept of the two sides. The whole structure of the limited liability company reflects the social division of Normans and Saxons which lasted unconsciously in this country until the adoption of universal suffrage. If people are not playing Normans and Saxons they are unconsciously playing the roles of money-barons and wage-slaves. Naturally, they do not get on with the business of creating wealth when they see themselves in those artificial roles.
Since we have had universal suffrage the old division of the country into Normans and Saxons has been, thank heavens, a thing of the past in the political sphere. That is not the case in industry. People are still playing these roles there and doing a great deal of damage thereby. Those who campaign for industrial democracy are trying to take into industry what we have achieved in politics by universal suffrage, and make the concept that every person's voice is as good as the rest into a reality in the creation of wealth as it is in the guidance of government.
I should like to see compay law guiding companies towards the formation of a team in which all the players in different positions do their best according to their particular aptitude or responsibility, but are united in the creation of wealth for the benefit of all who are contributing, whether by their work or personal skill or by their savings. When one thinks of what will be needed in terms of the flow


of savings in order to regenerate British industry to bring it up to the level necessary for us to survive in an intensely competitive world, we certainly have to protect our small savers and encourage them to recognise the importance of their role. I hope that Labour Members will cease their war on the small saver who is a shareholder in companies either by direct acquisition of shares, or, more likely, through investment institutions, unit trusts, savings institutions and the like.
I had hoped that the Committee stage on the last Companies Bill would last long enough to enable me to propose a new clause which had been ticking away on the Order Paper but which I never had the opportunity to introduce. The time may come again when I can table such a clause, and the next time I might have the hope of succeeding with it.
One of the important elements in British practice in working together for the creation of wealth is the idea of partnership. Partnership law in this country more or less came to a standstill at about the turn of the century. The idea of the very large partnership has never been put into practice. I should like to see experiments in corporate partnership on, at any rate, the scale of enterprises with 40, 80, 100 or even 200 employees, and possibly more. When we have learnt from corporate partnership on that scale, it might be a concept which could be applied in much larger enterprises as well.
If we are to end the rivalry between workers and shareholders for the share of the proceeds of the enterprise, we may need to introduce a concept such as "value added" as the determinant of the dividend. There must be a more mature approach to the power of the board to decide what is to be distributed and what retained in the business.
In enterprises where there is a growing degree of mutual confidence, it might well be good practice, and in the interests of the shareholders as well as the employees, that the dividend should be settled by policy rather than from year to year. The amount distributed should be settled in relation to the value added rather than the actual outturn of profit in each year's accounts.
That is possibly a Committee point on which the House would not wish me to elaborate on Second Reading, but I want to mark out this ground because I hope that Ministers who speak for the Government in the Standing Committee will be open-minded and able to take on board that there are many possibilities in company law which are impeded or even impossible at the moment because of the state of company legislation.
I should like to reduce the proportion of votes that are required in order to amend the memorandum and articles of an existing company. One can set up a new and experimental company form by registering a new company, but I should like to see existing small enterprises more easily able to change their memoranda and articles to come up to date with the type of thinking required.
A relatively minor change in the rules governing meetings might make it possible for companies to adopt new approaches to policy on the distribution of profit and other aspects of the management of the company which are particularly contentious as between the shareholders and the workers.
I should like to see a process towards change and experiment in companies being accelerated by tax reform. Over the past 50 years we have seen a dramatic change in the attitude of companies towards the provision of retirement benefits for their employees because they have been able to take advantage of the tax concessions which are offered to companies if they set money aside from their profits to set up a pension fund. Now this has become an enormous source of saving and an important financial feature. But it is not only in retirement that a company's management must look after its employees. With the pace of technological change accelerating all the time, one of the heaviest responsibilities on employers is to keep their employees fully trained for the work they are engaged in. The operatives—and middle and senior management as well—can easily work themselves out of their jobs through failure to adapt themselves to new inventions and processes that, in particular, overseas companies are adopting and which enable them to produce better products more cheaply.
Britain is in a tragic situation because of the obsolescence of traditional skills.


There are many workers who can do a splendid and sincere job of work whom the market has left behind because machines or new techniques can do those jobs better. Management must now find an enormous amount of money for retraining workers in the course of their careers, not merely for supporting them when they have retired. It is no good looking to the Government for the enormous sums of money needed for retraining. The companies must be persuaded to accumulate their savings and put them to good use within their own organisations. I would like to see, perhaps in the next Budget, generous tax concessions to companies which, instead of distributing dividends to shareholders, think rather of the long-term interest of company and shareholder alike and put much more money into funds to promote research and retraining in new techniques.
That is only one of the many ways in which I hope companies can overcome the dreadful "two sides" mentality. I hope that I shall have the honour to be a member of the Standing Committee and that that will provide an opportunity to say more.
I support the Second Reading because, although it is rather dry and disappointing, the Bill contains much that is necessary and good. I hope that by the time the sandwich comes back to the House for Report and Third Reading it will be looking much thicker and much more appetising, and will receive the enthusiastic support of hon. Members on both sides of the House.

8.16 p.m.

Mr. Bob Cryer: My contribution will be, as ever, brief. I thought it fitting to seek to take part in the debate because I have introduced over the past five years more debates than any other hon. Member on reports about various companies. Those reports resulted from the deficiencies of the system that the Government support—capitalism. The Conservatives are in a dilemma, because the state of capitalism is increasingly becoming more critical.
More jobs will unquestionably be lost. There will be more liquidations over the next few months and years. It is clear from what we have heard in the debate so far that there is a grave difference of emphasis on the Government Benches

about what Conservative Members expect for the regulation of private enterprise capitalism.
Although there are promises of amendments to come, the Bill is a mere cosmetic. What would have happened if the Government had adopted all the recommendations of all the inspectors that they and the Labour Government have employed at great expense to the public purse? There were the reports on Lonrho, Hilton Transport, Peachey and Larkfold Holdings, and there was the gem on Keyser Ullmann, which the electorate were denied the opportunity of seeing before 3 May. A glimpse of that report might well have changed the result in a few seats.
I think of the report on Ashbourne Investments, for example. In paragraphs 1256 and 1257 of their report the inspectors said:
In addition, our investigation has revealed a number of areas in which the present law and practice provide inadequate protection against abuse. We have considered these matters in their context in this Report, but, in particular, we underline here our concern about the lack of adequate safeguards for unsecured loan stockholders and the absence of clear standards in relation to 'window-dressing' of accounts.
Finally, we express concern at the inadequacy of the present legal machinery to enable the identification of the true owner or owners of shares of a British registered company where those shares are held by a nominee resident abroad.
One Conservative Member complained that the legislation placed no disclosure requirements on nominee shareholders and said that that was a matter of grave concern to workers. Although this is an academic debate about company legislation, the fact is that all the companies that we are talking about have work-people who attend their daily place of work and create the wealth that is distributed among the shareholders and provides the investment capital.
The hon. Member for Kensington (Sir B. Rhys Williams) spoke in the traditional terms of the benevolent, patriarchal Tory, which have been abandoned by the Government, who will rue the day. He said that the two sides should get together. That is always the wish. Everyone wants to be nice and reasonable. But the fact is that the system of economic activity that governs the major area of this country's economy is one in which a


iny group exploit the majority. For example, one has only to read the investigations which reflect something of the nature of board room activities. The directors of Larkfold Holdings had Rolls-Royces, when the company was in a cash crisis. There were those in Lonrho who were able to salt away £135,000 in the Cayman Islands. The company was not involved in the Cayman Islands, but those islands happened to be a tax haven.
Those who get out of bed on a Monday morning to go to the mill to work notice the differences. It is no good trying to paper them over and to say that we should all be nice to one another. That is difficult for the workers to accept when they see Jaguars and several Rolls-Royces roll up. There is the difference between the panelled board rooms in the medium and larger companies and the workers' canteens that often have to be fought for through the trade union organisation.
That is how the division is arrived at. It is not something that exists in people's minds because they wish it to be there. Everybody would prefer to work together. I believe that human beings instinctively prefer to do that. However, the system by which we govern our major economic activity is one that divides and sets people apart in numerous ways. It is no good suggesting that this miserable Bill will alter that, because it will not.
Clause 46 deals with the duties of directors towards employees. The clause is weak and inadequate. If the Government are serious about the two sides coming together, should not they have regard to equality between capital and labour? Should not they have regard to those who have only their hands and brains for sale, as opposed to those who have capital and the ownership of machinery, plant and equipment, factories and working capital? Should not there be equality between the two sides? I take the view that labour should have more than equality. After all, each one of us has only one life. That life when spent at work should receive treatment that is dignified and courteous. That life should be involved in decision making.
How often is that experienced? The answer is almost never. For example, the Bill should have regard to disclosure to

employees. The Bullock committee has been referred to in rather distasteful terms. Its report was a representation of a tide that will not be turned back. Those who earn their livelihoods by hand or brain are demanding a greater say in decision making in the places where they work.
It is not so many years ago that we thought it impossible for civil servants to go on strike. It was considered that they represented the Establishment. That has changed. There has been a similar change in many areas of industry, where employees are taking action because there is a growing determination to have some involvement in the direction of their lives at work.
The Bullock report was a modest move forward but it was treated with disdain by the CBI, by the then Opposition and by Conservative Back Benchers. The move forward represented by that report is irreversible. Workers will have more involvement in their industry in future. The power of labour should, in my view, be greater than that of capital.
My hon. Friend the Member for Walsall, South (Mr. George) mentioned—I think suitably—the requirement that should be embodied in the limited thinking of the Tory Party and its democratic notions. For example, shareholders should be able to approve the contributions made to political parties. That is an omission from the Bill that one might expect. It is a representation of double standards. Tories are much concerned about democracy in trade unions but they show little concern for democracy in companies.
It is interesting that one or two Conservative Members have said that certain standards should apply to small firms. The hon. Member for Kensington said that he was concerned that there should not be the opportunity in small firms to cheat, defraud and exploit. If we concentrate on small firms that have up to 200 employees in manufacturing industry, it is true that if such a firm cheats it is abusing legislation and casting a bad reflection on decent, small firms that try to do a useful job. The firms that cheat and defraud have no higher sights than that. If a firm of a dubious fly-by-night character uses existing legislation and abuses it, that is reflected throughout the whole of the industry.
In 1970, my local evening paper, the Telegraph and Argus, ran a good exposé on a series of firms that set up central heating installation services. These firms changed their names. For example, Allerton Plumbing became Tempo 1970. However, it retained the same directors and employed the same techniques. As a firm was wound up it left behind a pile of debts and unserviceable equipment. The same directors moved on, often leaving behind debts with supplying firms and debts to employees who were installing the equipment.
Two or three years ago one of my constituents expressed his concern to me about company legislation. He had his roof repaired and found that the work had been carried out in a shoddy manner. The firm responsible went into liquidation shortly afterwards. All that he could obtain was a letter from the accountant winding up the company to the effect that he was a creditor. That was not very much satisfaction when his roof was shoddily repaired and he could ill-afford to get the repairs done properly.
We must recognise that there is an area of activity where there can be abuse. It is no good saying that there should be massive exemptions for small firms. There will be unscrupulous firms that will take advantage of exemptions to exploit and to bring the reputation of decent firms into disrepute.
It never seems to occur to Conservatives that sometimes the ownership of small firms becomes divorced when relatives take over. Shares are inherited and the employees of small firms become apprehensive about takeovers or sales. They know that the relatives could not care less about the maintenance of the firm and the sustaining of ownership. During the halcyon days when I was a junior Minister, I remember visiting such a firm. I was told by the employees that they believed that the firm would be taken over. They explained that the shares were held by an aunt 13-times removed from the present director. They told me that the director was really an employee like them, and that they were deeply concerned.
Surely there is a right of information in those circumstances. Surely workers who find themselves in that position should have the right to form a workers'

co-operative. I vividly recall the example of Moderna Blankets in the Calder valley. It had been a decent family firm with £2 million-worth of orders. It was taken over by a fly-by-night organisation called Sona Consultants. There were three £1 issued shares. The firm was closed, 320 people were made redundant, and £2 million-worth of orders was handed over to importers. The skill and dedication of many people with a tradition of making blankets were thrown to the four winds.
Does the Bill do anything about that? It does not. We are promised future legislation. However, there should be safeguards against the abuse of customers, workers and shareholders. The Bill has little relevance to correct those abuses. I put the case. Why should not the workers, who create the wealth of the country, have the right to take over the firms they run and form workers' co-operatives if the alternative is simply for the firms to be wound up and become extinct?
In the case of Moderna Blankets, the local authority, which was Conservative-controlled, was ready to support a workers' co-operative. The shop floor workers, the accountants and the production managers were all keen to form a workers' co-operative, yet Sona Consultants said "We are not selling. We shall not sell the plant, the factory or the name." What was the result? Moderna Blankets are no longer made. The factory is mostly empty. Part of it is rented and the rest is up for sale. There are 320 fewer jobs in the Calder Valley.
The then Labour Government had no powers to require a sale. Any Government should have those powers. Frankly, I do not expect that from a Conservative Government, but I hope that the next Labour Government—which is becoming an ever-more realistic prospect in view of the activities of the Conservative Government—will take those powers. The Government must be able to exercise powers and prerogatives on behalf of the people.
There is no clear definition of the duties of directors. They have no degree of accountability which is clearly defined, even to their shareholders, let alone the public. As long ago as 1962 there was a recommendation on this matter by the Jenkins committee. There is no limitation in the Bill on directorships. People


may hold multiple directorships. That leads merely to collecting fees, not turning up at meetings and not taking a deep and involved interest in a company. We should all criticise such activities. However, there is now no remedy.
A tighter definition might well have prevented the scenes at the annual general meeting of a large worsted manufacturing concern, Salts (Saltair) Limited, at Shipley. A question was raised at the annual general meeting about how many board meetings one director had attended. The answer was "None". However, he was still elected because the majority shareholder used her vote to get her son, I think he was, back on the board. That is scandalous. It shows two terribly different standards.
All the time those board room and highfalutin arguments are going on, the workers continue to go in day after day. They cannot decide to take a trip to America. Nor can they decide whether their relatives should be elected to the board. The workers must just attend the factory and work, churning out the goods that keep the company afloat. That difference must be eradicated.
I refer to the huge multinational companies, such as Thorn which closed its Bradford factory at a moment's notice, causing 2,300 people to go on the dole. That is not good enough. We need companies legislation that will ensure that such companies are accountable not only to the shareholders but to the local community and the nation.
The Bill meets none of those criteria. My guess is that the Minister cannot do that as he is incapable of realising philosophically that private enterprise capitalism is not a satisfactory method of meeting all our economic activities. It is satisfactory in some aspects of small firms, but in many key economic activities too much power is in too few hands. Until we change that position and make that power accountable, the crisis of capitalism will continue.

8.35 p.m.

Mr. Nicholas Baker: I played a part as an outsider in seeing the work done in Committee on the previous companies' legislation. I admired the work of the tribe of accountants who set about putting that Bill in order. However,

I was worried that the discussions in Committee were so detailed and raised so many new points that did not appear to have been considered by the then Government's advisers. I asked that company law should be specific and clear. There seemed to be a general understanding among the supporters of the previous Government that a policy of legislative overkill should be applied to remedy insider trading.
I believe this to be a very dangerous process and, indeed, unnecessary if we are trying to deal with the wrongs and iniquities with which I want to deal, just as much as anyone else in this Chamber. If we are in doubt we have to consider thoroughly, in a way that this House does not always consider, the implications of our legislation before we enact it.
I welcome the approach of the Government towards small companies. The hon. Member for Keighley (Mr. Cryer) described the work force as avidly wanting power. I believe that the way forward for the work force is through the generation of small companies and through participating in the growth of small companies. I look forward to seeing what the next Companies Bill has to say about proprietary companies.
I share some of the cynicism about the detail—in some cases the unnecessary detail—of the EEC directives. The philosophy at the time of the last Companies Bill was that if they seemed reasonably applicable to public companies they should be applied across the board to private companies. That is quite wrong. My hon. Friend said that small companies will be released from statutory harassment, and I have great confidence that he will continue to bear this in mind. I am sure that we shall continue to remind him of it. I am delighted with the Government's approach.
People dealing with small businesses and investing in them are in a completely different position from those concerned with large companies in regard to such matters as protecting their investments, requiring more information to be made available, and having security. In the debate we have been talking about small companies of the kind that I have in my constituency, in which usually no more than 20 or 30 people are engaged, and confusing them with large public companies employing 2,000, or 3,000, or more


employees. They are two completely different animals, and should be treated as such in company legislation.
We have been discussing what should be the duties of directors towards employees. It is fashionable to believe that by providing a duty of directors to employees we shall somehow engender participation of the employees in companies. The hon. Member for Walsall, South (Mr. George) says that we must incorporate the work force into the decision-making process. I want to see all sides in British industry, in companies large and small, working together. I do not believe that we shall be able to do this in the field of company law.
Employees are already uniquely protected, quite rightly, within both private and public companies. They are covered by legislation concerning redundancy, employment protection, minimum pay in certain industries, health and safety, contracts of employment, and so on. There is also legislation concerning offices, shops and business premises. This is entirely right. Indeed, in many ways the employees are locked into the company, and they have a first charge on the profits and earnings of the company. I believe that to be right. But it is too hopeful to expect that we shall somehow engender participation by enacting legislation in company law.
I have seen for myself the growing practice of employee meetings, and I do not share the cynicism of an earlier speaker about this practice. It gives employees the right to know what is going on in their company. The usual form of these meetings is that the manager in every department of the company answers questions on all aspects of the company's business. That must be right.
Looking at the drafting of the last Companies Bill—this goes back to my point about certainty in legislation—I was surprised that there was ambiguity whether employees were being given the right to sue directors direct. To give them that right would be an extremely divisive action and would encourage divisions in situations where we are told too many divisions already exist. It is right that directors should have a duty to have regard to the interests of employees, as of shareholders as well, but a separate right for employees to sue directors would be unnecessary and wrong.
I am glad that no attempt is made to define a director's standard of skill by an objective test. Certainly let us codify the case law, but let us ensure that it does not freeze the law as it stands, but allows the courts to continue to develop it to meet new circumstances and demands that they consider may properly be made on directors.
Turning briefly to insider dealing, I believe that too much scorn has been poured on the activities of the takeover panel. As a practitioner, I have seen some extremely effective self-regulation carried out by that body. But with insider dealing I have come to the conclusion that it is not sufficient to rely on self-regulation and that a criminal remedy is necessary in takeovers of public companies. We must have specific legislation. I have not had time to consider these detailed proposals in the Blue Paper, but I hope that the provisions will be specific. For example, we should define as closely as possible the information relating to public companies, the dealing in whose shares is restricted. We discussed this matter in Committee. I hope that the Minister will take note of that point.
In Committee it became apparent that the wording of the then Companies Bill would prevent stock jobbers, who carry on a respectable business, from carrying out their practice in a perfectly legitimate way. I hope that we shall have well-drafted legislation before the next Bill is introduced. I share the view expressed by hon. Members on both sides that that Companies Bill should be introduced early.
I take issue with my hon. Friend the Member for Harrow, Central (Mr. Grant) on the suggestion that section 210 of the 1948 Act needs no expansion in the way that has been incorporated into clause 47, which relates to "members unfairly prejudiced." That is the recommendation of the Jenkins committee and is a necessary widening of the remedy available to a shareholder, not just as a member of a class, to take action if he feels he has been wronged.
The hon. Member for Walsall, South compared the situation here with that in America under the securities legislation. We should be careful before trying to draw too close a parallel between the two countries. In America there is a tradition of selling shares over the counter.


There is a much larger community there and a much less effective and efficient passage of information. I know of no evidence that their legislation has resulted in less abuse than has our system, which does not have a criminal sanction for the prevention of insider trading.
I do not believe that company law is the proper vehicle for social reform. I go back to the point about participation that my hon. Friend the Member for Kensington (Sir B. Rhys Williams) put so eloquently in his interesting speech. I believe that if my hon. Friend and hon. Members opposite are looking to company law to achieve the reforms that they want, this is the wrong medium for it. I welcome the Bill and I look forward to the next.

8.45 p.m.

Mr. Martin Stevens: After so many wise and sober interventions, my own may seem a fraction frivolous. The Minister of State, my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson), would be entitled to say that I am speaking in the presence of the wrong Minister, on the wrong Bill, and advancing my views in the wrong way. Added to that, the central point I wish to make is one in which I have a personal interest: I am the chairman of a company that produces annual reports for large organisations.
However, Labour Members might support me. They have spoken at length about participation, and there was also some criticism of companies which give money to the Conservative Party against the wishes, perhaps, of some of their shareholders.
We are in danger of misleading the public on the question of big business support for the Conservative Party. The fact is that about 20 per cent. of the Conservative Party's income comes from business contributions, compared with a much larger proportion of the Labour Party's income which comes from trade union donations.
As a trade unionist, I know that my branch of my union would like to be able to pay its political levy to the party of its choice, but that is not permitted because of the rules governing trades unions affiliated to the TUC. For my part, if the Minister felt disposed to make the

approval of donations to my party subject to a vote of shareholders at the annual general meeting, I should be perfectly happy for him to do so. What is democratic sauce for the TUC is democratic sauce for annual general meetings. I have no doubt about which way that vote would go.
Opposition Members have a valid point when they refer to employee participation. I am not concerned with Bullock, which attracted almost no support from shop-floor workers, but a good deal from trade union officials who might hope to gain preferment as a result. But there is no doubt that employees are not, under present legislation, given a clear status within company law: nor, in many cases, do they have the information that they should have—here I agree with Labour Members—as a matter of right. I commend a very simple solution to the Minister. We should say, perhaps under clause 44 or 46, that employees should have an absolute statutory right to receive the company's annual report. That has been the case anyway in many companies for several years.
However, if we made it a legal requirement, what would follow? First, the information given in the report would gradually be adapted to suit the needs of the work force as well as the needs of the shareholders. For our old friend the private shareholder, that would be a great advantage. Second, the pressure on firms of all sizes—particularly small firms—to gather together and publish ever-increasing disclosures about their activities would automatically be geared to the size of the firm. For example, a firm which employs 160,000 people and has approximately the same number of shareholders—let us say a firm such as Unilever—would continue, as it could easily afford to do, to gather together all the information that could possibly be disclosed to shareholders, employees and the public, whereas smaller firms, which perhaps produce their reports on a couple of typewritten sheets, would not be put under pressure, other than through the gradual working of their own director-employee relationships, to add additional information to that which they were already producing.
It follows that where many of the discussions about disclosure in annual reports centre around the desirability of


companies of different sizes devoting resources to producing information, by my simple proposal the amount of information given would be scaled, first, to the size of the company and, second, over the passing years, to the desires of the readership, including employees and shareholders.
The duties of directors are at present emphasised by the Institute of Directors, an organisation which is not wholly unfamiliar to the Minister of State. I look forward very much to the publication of its proposals, which I believe will take the self-regulating approach to the duties of directors very much further. I hope that hon. Members will find time to study these proposals as they emerge.
However, I am a little sceptical of the proposal of my hon. Friend the Member for Mid-Sussex (Mr. Renton), who suggested that directors' expenses should be included in annual reports. That is an extremely difficult figure to produce. It is within my own experience that directors of many large companies ask junior colleagues who are present with them, and not themselves directors, to take expenditure on to their own expense accounts. Without putting a Treasury investigator on to every activity of every director, I do not really see how one could alter that. We only bring the law into contempt if we seek to impose regulations that are too easily avoided.
I very much hope that my proposal relating to annual reports will be considered within the Bill. If not, I hope that the Minister will keep the thought in mind for possible inclusion in the forthcoming Bill based on the Green Paper.

8.54 p.m.

Mr. John Browne: I welcome the Bill because I agree with many of its provisions and also because it shows the Government's willingness to go forward into the EEC with some enthusiasm. In saying that, I am afraid that I agree with my hon. Friend the Member for Harrow, Central (Mr. Grant) in that I find it slightly worrying that more emphasis is not given to small businesses. I refer particularly to the definition, role and status of proprietary companies.
I am sure that many would agree that small businesses are absolutely key to this country's survival, particularly if we are to remain as a developed nation.

Small businesses are proven to be the great innovators, and it is by innovation that we develop new products. New products mean that we produce and sell in areas of the world where there is less competition. Therefore, new products mean higher margins, higher profits and higher tax revenue for the Government to fund increased and improved social benefits. New products mean new jobs. They do not mean just new jobs; they mean new profitable jobs, and new profitable jobs with more job satisfaction.
In many small companies there is what is known as the small company atmosphere, where management really is in personal contact with the work force and two-way discussions go on in those companies. I believe that most small companies in the Western world have very good records of industrial relations. As proof of the fact that new jobs are created we have only to look at the United States of America. Two-thirds of the new jobs created there last year came from companies employing fewer than 20 people.
In the past, we in Britain have concentrated on maintaining dead and dying industries in order to protect unprofitable jobs—unprofitable jobs which are often intensely frustrating for the work force and for management, and certainly for the consumer. We have financed this protection by massive Government borrowing and by penal, almost confiscatory, taxation. We saved some jobs for just a few years—but at what a price! We fanned inflation. We discouraged risk taking. We killed investments in new products, new markets and new production. We frustrated our management and our work force. We destroyed good industrial relations. We destroyed our share of the world market in our products.
Now we are a poor but expensive country. Worst of all, we run a very serious risk of becoming an underdeveloped industrial country. Most underdeveloped countries have good climates and plenty of agriculture. Many are self-sufficient in agriculture. It is not too difficult for them—but imagine Britain being an underdeveloped country in this northern climate and without self-sufficiency in food.
The old game was industrialisation, but unfortunately today everyone can play that game. The new ball game is technology. If we in Britain are to enjoy


a relatively high standard of living as a developed nation we must undergo a technological revolution—not just a second industrial Revolution, or a revivifying of our industry by the use of vast revenues from North Sea oil. We must concentrate on becoming a technological country and go through that technological revolution, just as it is already beginning to happen in the United States, Japan, Germany and even in Switzerland. The catalyst for that technological revolution is almost certain to be small business.
I believe that within the next 10 years the developed world will consist solely of technological countries. The underdeveloped world will consist of industrial and agricultural countries, and primary producers. I agree with the Government's economic and industrial policies, but I have one great concern. That is that there is a real risk that entrepreneurs in this country will be too slow to grasp the great opportunity—the great chance, that is now before them—to start new companies and to embrace new technologies.
Therefore, whilst I support the Bill, I hope that the Government will, as a matter of urgency, press ahead to enact provisions for proprietary companies, because I see this as absolutely crucial to ensuring that entrepreneurs come forward now—not next year or the year after; it will be too late—to grasp these opportunities and to take us forward into the technological revolution, into being the type of country that can enjoy a good, well earned and legitimately high standard of living.

8.59 p.m.

Mr. Peter Archer: The House will understand if I do not share the feeling referred to by the Minister of State that we have been here before. I have not. For the past five years I have been otherwise engaged and I am looking forward to bringing my education up to date. There was a time many years ago when I taught company law—but I do not propose to tell the House how many years ago.
The subject that we have been debating largely concerns problems that arise from the concept of limited liability. It is perhaps worth reminding ourselves that the general rule of law is that those who behave so as to become liable to the claims

of others lay their assets on the line to satisfy those claims. Limited liability is an exception to the general rule. These days we hear much about exceptions and exemptions. It is said that trade union officials are exempt from certain general rules of law when they act in furtherance of a trade dispute. Perhaps in the near future we shall be arguing whether those are genuine exceptions or only semantic exercises.
It is certain that limited liability is a genuine exception, though I agree with the hon. Member for Harrow, Central (Mr. Grant) that it is conferred for good reasons. It is a method of enabling industry and commerce to make use of capital from those who otherwise would not be in a position to invest. It is certainly arguable that without it we could not have manufactured and distributed the range of goods that is available to consumers, but an exception it certainly is.
Originally, limited liability was viewed with deep suspicion. A gentleman was expected to ensure that those who extended credit to his enterprises were safeguarded by his own personal fortune. A Mr. J. R. McCulloch, writing in 1856, had this to say on the subject:
In the scheme laid down by Providence for the government of the world, there is no shifting or narrowing of responsibilities, every man being personally answerable to the utmost extent for his actions.
Until 1844 there was no corporate trading without a specific Act of Parliament, and limited liability came only in 1855 with the Limited Liability Act, which the Law Times referred to as "the rogues' charter". It was granted for specific reasons where it was believed to be in the public interest, but it is not an inalienable right.
When we are told that the Government and the law should not interfere in commerce—or, as we were reminded tonight in more moderate terms by the hon. Member for Mid-Sussex (Mr. Renton) who wanted us to leave companies to work out their own structures—we should be clear that limited liability itself represents an intervention by Government and the law. If that intervention to confer a privilege is given on terms, there is nothing inherently wicked about that.
Mr. Paul Derrick, in a Fabian pamphlet that he wrote in 1964 on the company and the community, explores some


of the terms that we could impose. They are not in the Bill, have not been mentioned tonight and I doubt whether they will be in the Committee. There is, however, a range of terms that we could properly discuss imposing in return for the exemption represented by limited liability.
We could go further. Limited liability is no more sacroscant than any other economic device. If the dangers were to exceed the benefits, limited liability might follow the medieval guilds or merchant adventurers. On the other hand, if the dangers can be adequately contained, it will continue to find a place in our economy.
There can be no complaint if Parliament conducts an audit from time to time of the relevant benefits and dangers, and that is a continuous process. Looking at the progress that we have made over the past few years, I was a little surprised to find that there is somewhat less direction than was envisaged by Berle and Means in their standard work in 1932 when they said:
The law of corporations might well be considered as a potential constitutional law for the new economic State while business practice is increasingly assuming the aspect of economic statesmanship.
Of course we do not overlook the fact that many of those who control companies have a high sense of public responsibility and observe very high standards of integrity. Indeed, they contribute to such public concerns as sponsorship of the arts and sport, for which many of us have reason to be grateful. Just as we must not speak as though companies had no responsibilities to the public, so we must not speak as if they have always ignored those responsibilities. Unhappily, along with the many responsible and public-spirited men in this field there are also dishonest and unscrupulous men and we must take account of them as well.
A number of hon. Members on the Conservative Benches—the right hon. Member for Crosby (Mr. Page), the hon. Member for Mid-Sussex, the hon. Member for Dorset, North (Mr. Baker) and the hon. Member for Winchester (Mr. Browne)—all pointed out that we should consider whether the form of protection which is reasonable in the case of large companies need not necessarily be

extended to small private companies. Certainly, what is a necessary protection when applied to a company with many shareholders who do not even know the directors and with many employees who never meet even their departmental managers, may not be necessary when applied to small companies. There would be no complaint from this side of the House if reasonable exemptions were introduced, provided, of course, that they did not extend to relaxing safety measures. The proposal was in our consultative document.
Clearly, limited liability has its dangers, and company law is about protecting people from these dangers. If I might attempt an analysis, it protects three kinds of people from two kinds of danger arising from two kinds of disability. I shall take the disabilities first. These are a lack of knowledge in the absence of an obligation to disclose because knowledge of the affairs of a company is normally confined to those who run it; and an absence of power because decisions are taken by a small group whose members may be tempted to give their interests priority over those of others.
Those two disabilities may give rise to two kinds of danger. First, someone may give credit to the company, either by paying money to it or by supplying it with goods and services or by providing its labour. He then may find that the company has insufficient assets to meet his claims. The second danger is that the long-term interests of the company and of those who depend on it may be subordinated to the immediate prospects for certain people to make a fast buck.
Therefore, the purpose of company law is to afford protection from those dangers arising from those disabilities to three groups of people. These are those who invest their money in a company as shareholders; those who deal with the company; and those who are employed by the company. Briefly I should like to consider what has emerged from this debate in relation to those three categories.
First, let us take the shareholders, those who invest in the company, including those who have an interest in the institutional investors. These may be the beneficiaries of pension funds. The majority have no effective voice in the running of the company. We have all known


that since Burnham published "The Managerial Revolution". That has been reinforced from time to time by some judicial decisions which, given the state of the law, cannot be the occasion for complaints. This might have been different had we begun afresh in writing a new company law. An obvious example is the rule in Foss and Harbottle. A more recent example is the case of Cuthbert Cooper and Sons Limited, where it was said that in a private company, where the majority directors had not even shown the balance sheet to the minority directors, there was no evidence of the reasons for this before the court and they may well have had good reasons for their failure.
No one will ever commend or condemn me for my uncritical admiration of the other place. But there is no doubt that the Bill has already been improved by amendments introduced there by my noble Friends Lord Bruce of Donnington and Lord Elwyn-Jones. I refer in particular to an amendment, which is now clause 47, which strengthens the protection of minority shareholders.
It is interesting that when the previous Bill was debated in the House the present Secretary of State said that he would like to go further. He said:
Naturally, I welcome the fact that greater protection will be given in the Bill to minority shareholders who have been—and I quote from the Bill—'unfairly prejudiced'. But I am not sure that the drafting of the sections on minority shareholders is correct, or that the Bill goes far enough. We need to give a prescriptive opportunity to shareholders to vote in general meeting when the directors seek to dispose of substantial assets without reference to the owners of those assets—namely, the shareholders."—[Official Report, 20 November 1978; Vol. 958, c. 950–1.]
The hon. Member for Harrow, Central is correct to say that rights may be abused. Any right may be abused. Magna Carta can be abused, and when it was signed some said that it would be abused. The right of the individual to petition the European Commission on Human Rights can be abused and it was prophesied that it would be. However, I hope that we shall not refuse to grant rights because of the possibility of abuse.

Mr. Anthony Grant: I was trying to argue that where people have rights to issue writs there are safeguards against

possible abuse by extreme minorities. As a former Law Officer the right hon. and learned Member will appreciate that.

Mr. Archer: The hon. Member mentioned the safeguard of declaring someone a vexatious litigant. However, he and I would not wish to rely on that. If sensible safeguards are suggested in Committee there will be no serious opposition. I hope that the Government will explain what they think about the comments of the Secretary of State last November.
Of course I accept that a good principle is not always the better for being applied without qualification. Perhaps directors need a measure of independence from the pressure of shareholders to make maximum profits in the short term and to declare maximum dividends. That is not inconsistent with ensuring that shareholders are properly informed about the affairs of a company and that their remedies do not depend on the often illusory right to organise a palace revolution at a shareholders meeting.
We are pleased about clause 17. The hon. Member for Harrow, Central will agree that although practical problems may emerge they will not be insoluble. We do not wish to abandon the ship because we cannot paint the poop.
In Committee we shall discuss disclosure of information, at least to the shareholders. That disclosure is comparable with the rights of the beneficiaries of a trust to know how the trustees are administering their property. We appreciate that there must be safeguards to ensure that information does not fall into the hands of competitors.
But the approach should be to try to give effect to the right, subject to safeguards, rather than to discuss how little directors can get away with disclosing. When Lord Wedderburn wrote his Fabian tract on company law reform in 1965 he revealed the difference between the approach in the United States, where the public interest is regarded as paramount subject to exemptions, and in the United Kingdom where disclosure is considered something of a privilege.
The hon. Member for Mid-Sussex referred to the disclosure of specific directors' expenses, and my hon. Friend the Member for Keighley (Mr. Cryer) referred to the disclosure of the principals


of nominee shareholders. Certainly we would not regard the disclosure of those matters as unreasonable.
The speech of the hon. Member for Kensington (Sir B. Rhys Williams) promised a number of interesting debates in Committee—interesting, whatever else they may be. I am sure that the Minister of State would not dissent from that. What the hon. Member said about audit committees intrigued me. Indeed, he put the matter clearly during the Second Reading debate on the previous Bill. The problem is that shareholders of a large company have virtually no contact with auditors. Auditors tend to find themselves reporting, in practice, to the very people who appointed them and to no one else. We may be pushing at an open door on this point and I do not need to detain the House at great length on the matter.
Companies require someone who can look not only at fraudulent practices and the sins of omission but at the whole effectiveness of corporations. Perhaps companies whose management lacks energy would benefit substantially from that proposal. My hon. Friend the Member for Hackney, Central (Mr. Davis) pointed out that consultations had already been held on the matter. Perhaps we can hear more from the Under-Secretary of State about the Government's thinking when he winds up the debate. We have already heard that the New York Stock Exchange has made it a necessary condition of quotation there that there should be an audit committee. If the Government know the views of the Stock Exchange here, I hope that the House will be informed of them.
Another disability of shareholders, which has emerged more than once in the course of the debate, is their inability to decide that their share of income should not be devoted to causes of which they may wholly disapprove. My hon. Friends the Members for Walsall, South (Mr. George) and Keighley drew attention to the fact that we hear repeatedly that members of trade unions are entitled to contract out of political contributions so that their assets will not be directed to political causes with which they are not in sympathy. The problem has been the subject of an amendment to the previous Bill by my hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo),

the subject of a Bill by the former hon. Member for Nelson and Colne, Mr. Hoyle, and the subject of an amendment in another place by my noble Friend Lord Wedderburn of Charlton. We proposed to deal with the matter in a separate Bill because the point was taken that it does not fit snugly into a Bill on companies legislation. I hope that we can be told whether there is to be a separate Bill. If not, there seems to be no other vehicle for discussing the matter.
What about those other people, apart from shareholders, who deal with companies? I refer to those who, in one form or another, give companies credit. My hon. Friend the Member for Keighley illustrated the position of a person who paid money to a company, possibly after a newspaper advertisement, only to find that when he tried to enforce his claim the company was devoid of assets. Meanwhile, the majority shareholder has passed on to another incarnation, where he is busy carrying on the same activity. Section 188 of the 1948 Act gives some powers to the courts to direct that a person in that position shall not act as a director in future. That provision was extended by the Insolvency Act 1976. Yet, those cases still occur. It is no use quoting law at people to whom it has happened. One has only to listen to television programmes such as "That's Life" to understand how frequently it happens and how those people look to us for some measure of protection.
My hon. Friend the Member for Hackney, Central referred to the position of the Registry of Business Names. He pointed out that if there were an increase in fees, which need not be unreasonable, the registry might be able to provide a better service to those who want to investigate the position of companies with which they propose to have dealings.
A small business man in my constituency has been writing to me for a long time urging cuts in Government expenditure and complaining that it is much too high. But he wrote recently in a fury because he had written to the registrar asking for information from the registry and had been told that it could not be provided and that if he wanted the register inspected he could send someone from Birmingham to London, but that the registry did not have the staff to look in the register. My constituent pointed out that


that was not a profitable use of commercial time and perhaps not the best way of ensuring that our exports flourished. I wrote back and asked him whether he now agreed with me about the need for public expenditure. Conservative Members seem to be objecting to that, but if there is a defect in my logic no doubt we shall have it explained by the Under-Secretary. If one wants that sort of service from the registry, one has to pay for it.
Some of us are a little troubled about the proposals relating to trading under misleading names, because the registrar has apparently sent out a consultative document to the users' committee, indicating a proposal to abdicate the existing powers in relation to trading under misleading names. Perhaps the Under-Secretary will tell us how that fits in with clause 48.
There also seems to be a proposal to withdraw the requirement that the names of directors should appear on a company's stationery. Surely those who propose to deal with a company are entitled to know the names of the directors, and perhaps they would expect to find them on the company stationery. I hope that we shall hear a little more from the Government about that proposal.
What has really been troubling us is the problem of insider dealing. Not only does it do damage to other investors, but it damages the whole ethos of confidence in the commercial life in this country. There have been many serious abuses. The problem was referred to by the Jenkins committee and by the Justice report in 1973. Provisions were included in the Bill introduced by the Conservative Government in 1973.
The point at issue is whether there should be criminal sanctions. Morris Finer QC, subsequently Mr. Justice Finer, wrote in "The Accountant" as long ago as 1956:
From that standpoint, the notable characteristic of the law is the timidity with which in company matters it shapes up to its responsibility of deciding what conduct shall attract personal consequences, what only civil consequences, and what no enforceable consequences at all.
I agree with my hon. Friend the Member for Walsall, South that self-regulation is all too often a method of keeping criticism

within the family. That is certainly how the public see it.
The hon. Member for Mid-Sussex made the interesting suggestion that it would be possible to enact that those who make a profit out of insider trading should be responsible for paying the benefit to the company. I was pleased that he did not propose that that should be instead of criminal sanctions, but should be added to them.
I am sure that the Minister of State will forgive me if I remind him of the history of that suggestion, which has been rather puzzling during the course of the Bill. In another place Lord Elwyn-Jones moved an amendment, and it transpired that the Government were strongly opposed to insider trading and thought that it should be discouraged and condemned in every way, but they needed more time to deal with the drafting. The amendment was defeated on a Division, though even that took the matter further than the reception received by the suggestion on Second Reading, when Lord Trenchard said that shareholders who did not like the use that directors were making of their funds could contract out, in effect, by selling their shares and investing in another company. I do not know what the reaction would be if we suggested that we should abolish the contracting-out requirement in the political funds of trade unions because anyone who did not like the use that a union was making of his funds could withdraw them and join another union.
Now the Minister of State has cheered us up and we can only join in the joy in Heaven, however late the repentance. However, we shall want to see the form of the proposals, because as my hon. Friend the Member for Swansea, East (Mr. Anderson) said, we do not know what the process of consultation will be, and we do not know whether the amendment will be less than we had hoped for. However, we accept that that proposal is made in good faith, that it is a firm undertaking, and in those circumstances I advise my hon. Friends not to divide on the Bill tonight.
That brings us to the third category, the position of employees. My hon. Friends the Members for Swansea, East, Walsall, South and Hamilton (Mr. Robertson) all mentioned the problems of disclosure to employees. I was glad to hear my hon. Friend the Member for


Hamilton point out that it is a matter of not just information but involvement. My hon. Friend the Member for Hackney, Central said that here was an opportunity to break down the barriers and mistrust, and to give employees a voice in the decisions that affect their lives, a voice which, as my hon. Friend the Member for Keighley said, will not be denied.
I take the point of the hon. Member for Dorset, North that that will not be achieved simply by amendments to company law. He was supported in that from an unusual source—by my hon. Friend the Member for Keighley. But I was taken by what was said by the hon. Member for Kensington, who said that the structure of company law at the moment helps to create this model of insiders and outsiders. The least that we can do is to try to remove that obstacle.
We begin with the fact that a shareholder who picked up a bundle of shares the other day in a company of which previously he perhaps did not even know the name is a member of the company, whereas an employee who has given 50 years of his working life is not. He has only a contract of employment with the company. If someone says that that is merely a semantic point, I fear that it is very much more. Now, following the decision in Parke v. The Daily News Ltd. not only are the directors not bound to take account of the interests of the employees in taking their decisions, they are not even entitled to do so. I am delighted that clause 46, which was inserted in another place, has begun to rectify that. I was most interested to hear what the Minister of State said about that tonight. However, I confess that he disturbed me a little—

Mr. Renton: The right hon. and learned Gentleman must surely see that the whole point of the case of Parke v. The Daily News Ltd. is that it applies only when a company is going into liquidation, and it should be seen only in that context.

Mr. Anthony Beaumont-Dark: It was giving everything away.

Mr. Archer: I am not at all sure that the matter was limited in the way that the hon. Member for Mid-Sussex

described. However, the important time for what happens to the assets is precisely when a company is going into liquidation. I think that the decision may be far more dangerous than the hon. Member seems to think.

Mr. Beaumont-Dark: What happens to the shareholders?

Mr. Archer: That is a very fair and relevant question. However, are we not also entitled to ask what happens to the workers?

Mr. Beaumont-Dark: The mistake that the right hon. and learned Gentleman is making is in not realising that in The Daily News case the company was giving all the assets away because it thought it the moral thing to do. The shareholders took the equally moral view that there should be something for them as they owned the company.

Mr. Archer: What matters is not the facts of the case but the decision and the ratio of the case. I am not complaining about the decision or suggesting that the court was in any way at fault. It was, I believe, correctly construing the law as it stands.
The Minister of State troubled me a little because he went out of his way to say that the obligation which it is now proposed to introduce should be an obligation owed only to the company. I assume that that was a way of saying that it should not be actionable at the suit of an employee. If a shareholder can in certain circumstances bring proceedings to enforce his rights, how is it envisaged that this right shall be enforced? Perhaps the Under-Secretary can reply to that tonight. If he cannot, we shall press the matter in Committee.
I was interested in the proposal of the hon. Member for Fulham (Mr. Stevens) of imposing at least a statutory duty to provide information for employees varying with the size of the company. I would not want to pass judgment on the idea tonight, but it seems to me well worth looking at more closely, and perhaps we shall have an opportunity of doing that in Committee.
What has troubled everyone is what my hon. Friend the Member for Hackney, Central called "corporate abuses," disclosed in a succession of inspectors' reports. I agree with my hon. Friend the


Member for Keighley that the prognosis is less than promising. The public wish to know what is happening, but the problem is that if the report is published and is widely discussed it may well be difficult to prosecute anyone who should be prosecuted because the jury will have heard the whole of the discussion before it has heard the evidence in court.
The fact that that is a difficulty indicates that we should give a great deal of thought to it. It is an area of legitimate public concern and anxiety. The three categories that I have mentioned—the investors, the customers and suppliers and the employees—need to have confidence that they have adequate protections. Those protections are frequently of a technical nature, and perhaps to our constituents they sound remote. Our constituents will test the pudding only by the eating. We in this House, and particularly in Committee, must not let them down.

9.31 p.m.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): I have listened to the exchanges across the Floor of the Chamber throughout the debate, and realise what a great privilege it was to have served in that long-serving and famous Standing Committee that reviewed the 1978 Companies Bill. Occasionally those of us in the Chamber who had not served on that Committee perhaps began to feel that we were not fully qualified to discuss the highly technical matters raised. It was refreshing when the right hon. and learned Member for Warley, West (Mr. Archer) made clear that he had similar feelings about that.
I was interested in the right hon. and learned Gentleman's reference to his career as a lecturer, because I lectured for about a year on land law and I remember one of my fellow lecturers telling me that one should never throw away one's lecture notes because they might come in useful at some time. I suspected during the early minutes of the right hon. and learned Gentleman's speech that he had taken that advice.
I wish to reply to as many of the points raised in the debate as possible. The Bill is clearly one of a series of Bills necessary to implement directives emanating from the EEC. Some people have

reservations about the harmonisation programme, but we have to accept the consequences of it and deal with them. I shall return to that subject shortly. I should like to raise two preliminary points, one about consolidation and the other about the process of consultation.
The aspect of consolidation was raised—not surprisingly on such a complicated subject—by a number of hon. Members, principally by my right hon. Friend the Member for Crosby (Mr. Page), but also by the hon. Member for Swansea, East (Mr. Anderson). I recognise that the present profusion of Companies Acts is highly unsatisfactory for all those people concerned with company law. I am glad that work is in hand on preparing a consolidating Bill. Consolidation is not a straightforward task. In the present case, with seven Acts, apart from this measure, to be consolidated, the task is immense.
As for timing, it would at first sight seem desirable to consolidate as much as possible, but no final decision will be taken until nearer the time, when there has been more progress on consolidation and we have a clearer view of the scope of the Bill that we intend to introduce in 1980–81. I emphasise to my right hon. Friend the Member for Crosby that consolidation is a continuing process. If we are able to consolidate within a continuing flow of Bills, we shall reduce the number of Acts to which practitioners have to refer. I hope that some of the amendments to be tabled by the Government in Committee will pave the way towards consolidation.
I refer to consultation and advice on company law reform. I shall describe the way in which consultations are undertaken. We recognise, as did our predecessors, that changes in company law require as full and as expert consideration as possible at all stages. One of the keys to that process is consultation. It is a self-evident truth that those in industry and commerce have a vital role to play in the process of company law reform.
My Department has an established practice of consulting widely on a broad range of issues concerning company law reform in Britain and the EEC harmonisation programme. We propose to retain the essential flexibility of the present informal arrangements. Therefore, we do not intend to establish a permanent independent advisory committee as proposed


by the previous Government. Instead, the Department of Trade will be inviting professional bodies and other interested parties to nominate representatives to serve on a panel of advisers on company law. The panel will be used as an additional channel of consultation and will meet from time to time under the chairmanship of the senior official of the Department. The present informal bilateral methods of consultation will be retained.
We have taken a further step, which I am sure hon. Members on both sides of the House will welcome. We have engaged, on a part-time consultancy basis, Professor L. C. B. Gower as a research adviser on company law. Professor Gower is an internationally recognised expert on company law. He will assist my Department over the whole range of its work on company law.
The hon. Member for Hackney, Central (Mr. Davis), who led for the Opposition, expressed some criticisms and reservations about the self-regulatory system. I emphasise that self-regulation in the securities market, as practised, for example, by the Stock Exchange and the City takeover panel, has ensured an efficient and honest market which has served well the interest of market users. It has also served well the interests of the British economy.
The establishment of the Council for the Securities Industry greatly enhances self-regulation by bringing closer together the various interests involved and concerting the control which they can exercise. The Government welcome the development and look forward to continuing progress by the council in its appointed area.
The hon. Member for Hackney, Central referred to inspectors. It has already been stated that we are reviewing procedures for company investigations. Therefore, we welcome the committee that has been established by the Council for the Securities Industry to examine this important issue. The committee will be able to bring a wide range of experience to bear. We look forward to studying its report, which I understand is likely to be produced early in the new year.
Clearly it would be sensible for us to wait for the committee's findings before finalising our own review of procedures. That is therefore our intention.
My right hon. Friend the Member for Crosby, whose experience and knowledge of this subject is unrivalled, referred to the qualifications of company secretaries. Undoubtedly the raising of minimum standards of company secretaries is important. I want to be frank. We are not convinced that the case for a compulsory qualification is strong. It seems to be unnecessary. Companies may, if they wish, restrict applications for the job of company secretary to those with appropriate qualifications. Legislation could be potentially harmful, as a mandatory requirement would perhaps lead to too much stress being laid on technical qualifications and too little on the value of appropriate experience.
My right hon. Friend raised other important and detailed points, several of which the Government intend to deal with in Committee. I hope he will find that the way in which we deal with those matters is helpful.
My hon. Friend the Member for Mid-Sussex (Mr. Renton), who gave sterling service in Committee on the 1978 Bill, asked for an assurance. In the 1980–81 Session we shall most certainly introduce a Bill to deal with the fourth directive. He need have no fear of that. He also raised points about non-voting shares and insider dealing. We carefully noted them.
In an earlier intervention my hon. Friend raised an important question of the acquisition by a company of its own shares. In addition to what my hon. Friend the Minister of State said on the subject, I refer again to the question of how far companies should be free to acquire their own shares. The Bill restates the present law that prohibits such acquisitions. That is subject to a few exceptions. It goes on to make further provisions which, in the case of public companies, are called for by the directive. That represents only a holding operation. We fully recognise the force of the arguments advanced in permitting greater flexibility in place of the present prohibition, especially for small companies without a ready market for their shares. In the United States and European countries companies may purchase their own shares subject to various safeguards for creditors and other shareholders. We hope to publish shortly a consultative document setting out the


various options that appear to us to provide such flexibility both for private and public companies.
In the case of small, closely-held companies different arguments apply from those that apply to large quoted companies. The document will look at the whole range of cases. It will suggest various safeguards for the legitimate interests of creditors and the fair treatment of shareholders. In the work that is already in hand on this subject in my Department, Professor Gower, as the research adviser on company law, is already playing a valuable role. I very much hope and expect that, as a result of all this effort, the 1980–81 Bill will contain provisions enabling companies to acquire their own shares.

Mr. Graham Page: If there is to be consultation on a document, which I gather from the Minister is fairly well prepared, could not that take place within a short period, so that we might deal with the subject in this Bill rather than wait for another two or three years?

Mr. Eyre: I have always been aware of the very strong appetite of my right hon. Friend for work, and therefore we shall be very happy if he will apply his attention to the consultative paper. I have no doubt that he will be able to make some extremely helpful and valuable contributions. We shall do our very best to assimilate that advice, but my right hon. Friend will appreciate that the preparation of the clauses will be a very complicated legal matter. As he knows, we are always intent on getting these things right before the draft clauses are produced. He will understand if we make haste as rapidly as possible. We look forward to receiving his advice and views on the consultative paper. We shall then do our best to have the legislation at the earliest possible moment.
My hon. Friend the Member for Harrow, Central (Mr. Grant), who is a distinguished solicitor with a great knowledge of this subject, emphasised very correctly the importance of small proprietary companies. He laid particular stress on the contribution that they can make to the creation of wealth and jobs. The purpose of our company law is to provide a framework whereby industry and commerce can advance, using it as a sound base. In this my hon. Friend was

supported in very strong and positive terms by three of my newly-elected hon. Friends, the Members for Fulham (Mr. Stevens), Dorset, North (Mr. Baker) and Winchester (Mr. Browne).
I should therefore like to refer to the Green Paper on company accounting and disclosure, which then leads on to our main proposals on proprietary companies, because this is a matter of enormous importance. The Green Paper sets out the Government's proposal for the reform of company laws relating to company accounting and disclosure, together with our proposals for implementing the EEC fourth directive on company accounts. We expect to introduce that Bill in the next Session of Parliament.
The main feature of our proposals is the creation of a three-tier structure with differing requirements for large, medium and small companies. I noted with fear and apprehension the point made in this respect by my right hon. Friend the Member for Crosby. We propose that proprietary companies—that is, small, independent, private companies—will be required to disclose significantly less information than that at present required, although large companies will be required to disclose more detailed financial information. Both the form in which the accounts are to be presented and the valuation rules for the drawing up of the accounts will be set out in law as required in the directive.
We are aiming to recognise the wide diversity of companies with limited liability by putting the law relating to company accounting and disclosure on a more sound and appropriate footing. The Green Paper is intended to promote a wide-ranging discussion on its various proposals and to invite comments from all interested parties. All suggestions will be fully taken into account before the final decisions are made. We are receiving some extremely helpful and interesting comments on this consultative paper.
The hon. Member for Keighley (Mr. Cryer) spoke about inspectors' reports, and particularly the one relating to Ash-bourne Investments. The hon. Member for Hackney, Central mentioned window dressing. Implicit in both these points was to some extent a criticism of the accountancy profession and its failure to give guidance to auditors. I agree that action needs to be taken to discourage or


eliminate window dressing. It is necessary to ensure that window dressing transactions are adequately disclosed, so that any intention to mislead is frustrated.
The accountancy profession has been examining this problem. I understand that an accounting standard dealing with post balance sheet events is to be published shortly. That will refer to window dressing and will require that where transactions have been entered into prior to the year end with the purpose of improving the balance sheet date, and such transactions have been reversed after the balance sheet date, the reversal of those transactions must be disclosed. That will go a long way towards dealing with the kind of abuses mentioned in the Ash-bourne Investments case.
Turning to a subject which provided a recurring theme—

Mr. Clinton Davis: Before the Minister leaves that matter, will he say something about the significant omission, which I hope will be rectified, of provisions that we had made for increasing the fees of the Registry of Business Names? Do the Government intend to reintroduce those provisions or are they proposing to abolish the registry?

Mr. Eyre: As the hon. Gentleman knows, a number of studies are going on about the use of Government resources. No decisions have been arrived at in that respect or in a number of other respects. The hon. Gentleman will understand that I am replying to the main points that have been made on the Bill that we are now considering.
A recurring theme throughout the debate has been the matter of insider dealing. There has for some time been wide agreement in Parliament, industry, commerce and elsewhere that insider dealing should be made a criminal offence. The Companies Bills of 1973 and 1978 contained clauses that would have had that effect. However, on both occasions considerable concern was expressed about the undesirable effects that those provisions would have on the general activities of companies and those connected with them where such activities were not open to criticism.
Whilst recognising the force of the objections which have been made against previous formulations of offences, the

Government consider that insider dealings should indeed be made a criminal offence at the earliest opportunity. Therefore, they have prepared new legislative proposals that take into account the weaknesses apparent in the previous versions and consequently seek to identify and proscribe conduct that is widely condemned without inhibiting conduct that is legitimate or desirable.
The Government recognise that such proposals merit wide and detailed public consideration and, as they wish to facilitate such study, they have published the consultative document to which my hon. Friend the Minister of State referred. That document sets out fully the legislative proposals which have been prepared. The Government hope that their proposals will command such support as to justify introducing them as amendments to this Bill in Committee. Therefore, they have asked that comments on the proposals should be made to the Department of Trade as a matter of urgency. I mention that strongly in support of the points made by my hon. Friend the Minister of State.
We acknowledge the seriousness of the points that the hon. Member for Hamilton (Mr. Robertson) made, and our recognition is shown by our determination to make insider dealing a criminal offence. My hon. Friend the Member for Kensington (Sir B. Rhys Williams) made a number of powerful points. I was especially interested in his account of the New York audit committee development. I should like to make short reference to the two main points which he developed in his speech regarding non-executive directors and audit committees.
We welcome the fact that companies are appointing non-executive directors and also that some companies are setting up audit committees and experimenting with different structures to accommodate them. Circumstances, of course, differ enormously between companies, according to their size, the nature of their business and organisation. Therefore, flexibility is an essential quality in these matters. It is most important that companies should pursue methods of operation that enable them to improve management performance, both in terms of economic efficiency and in complying with statutory duties.
My hon. Friend the Member for Kensington stressed very strongly in his speech the need for companies to be successful and to make a proper contribution to the economic well-being of the country. But we do not consider that it is a proper role for the law to require specific practices to be observed merely because they are thought to be desirable. There is an element of fashion in a great deal of this thought and fashions change.
Company law should prohibit that which is wrong and provide a framework which permits, rather than requires, the development of desirable practices. What I said to my hon. Friend the Member for Kensington is entirely orthodox and, indeed, cautious, but I see the gradual progress for which he asked. This gradual change and improvement owes much to the efforts that he has constantly made to publicise and emphasise the importance of these matters.
I believe that we have had a useful debate. This is not an exciting bill; it is a sound, basic Bill, which I believe is capable of improvement in the Standing Committee. We have already advanced well in our consideration of clauses which we hope to be able to add to the Bill to improve it. Therefore, to give time to the hon. Member for Hackney, Central who I believe wishes to address you on a matter of some importance, Mr. Deputy Speaker, I urge that the Bill should receive a Second Reading and go on to a Standing Committee, which I think we can make useful and beneficial, and on which many of us look forward to serving.

9.57 p.m.

Mr. Clinton Davis: With the leave of the House, in view of the very substantial concessions that the Government have made during the debate, in which they have given way to Opposition demands for substantial widening of the Bill, and on the basis that consultations regarding insider dealing will be concluded with expedition as promised, so that there is a probability that effective provisions on insider dealing can be considered by the House before the Bill departs from it, I beg to ask leave to withdraw the amendment. However, we shall certainly look very closely at the

matter and take the Minister of State at his word.

Amendment, by leave, withdrawn.

Main Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

COMPANIES [MONEY]

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act of the present Session to amend the law relating to companies, it is expedient to authorise—

(a) the payment out of money provided by Parliament of any administrative expenses incurred by the Secretary of State and any increase attributable to the provisions of that Act in the sums so payable under any other Act; and
(b) the payment into the Consolidated Fund of any increases attributable to that Act in the sums received by the registrar of companies—[Mr. Eyre.]

Orders of the Day — BRITISH LEYLAND (PARK ROYAL VEHICLES FACTORY)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope.]

10 p.m.

Mr. Laurie Pavitt: I am sick at heart at the closure of the Park Royal vehicles factory, one of the finest factories in my constituency. It is a factory with which I have had the honour to be associated since I was first elected to this House 20 years ago—[Interruption.]

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. Will hon. Members please leave the Chamber quietly?

Mr. Pavitt: Like my hon. Friend the Member for Fife, Central (Mr. Hamilton), I find it nauseating and highly irrelevant that at a time when 630 families in my constituency are to be thrown out of work next June, British Leyland can be interested in backing the horses of Princess Anne's husband and sponsoring something that is entirely irrelevant to the industrial concept underlying British Leyland. It is akin to Nero fiddling while Rome burned,


because it seems that we are deciding to back horses rather than to put a viable industrial complex into action.
I have watched the Park Royal vehicles factory decline within a thriving industrial complex of skilled engineering in an area which is now typical of our inner city problems. Park Royal is now a wasteland and a desert of empty factory space and warehousing. This is having a tremendous effect upon my constituency, because one immediately gets a different mix of citizens and this brings local government and social problems. The closure of the Park Royal vehicles factory is a threat to any attempt to try to get Park Royal back to the prosperity that it once enjoyed. The factory is one of the last bastions of skilled labour in my area. For 10 years I have watched it being run down. I used to have a great pride in the fact that I could boast that London buses were made in my area and that they were the best in the world. These were built 30 years ago, but in the last 10 years an erosion has set in until we have seen the final collapse and toppling of the latest bus—the Titan—which is typical of the arrangements that have existed within British Leyland over the last five years.
The Titan is probably one of the best examples of skilled bus building ever to be seen in this country. It cost £13 million to develop. That will go down the drain, because the Titan is going down the drain. I should like to refer to the speech made earlier this year by Sir Michael Edwardes, when he said:
The Titan bus, the most advanced double-decker in the world, has attracted more than 500 orders, worth £25 million from passenger transport authorities. London Transport will take the bulk of the buses, which have won awards for human factors' design, particularly to help elderly and infirm people to use buses.
All of that effort and labour will now be wasted. I indict the vacillating and indeterminate management of British Leyland as the cause of this failure. I suspect that the death wish was ever present in the Leyland hierarchy, which always concentrated its mind on cars and seemed to know very little about bus building. If small is beautiful, then Leyland has shown that so far as my constituency is concerned, big is absolutely disastrous.
At the centre of this disaster have been years of uncertainty, the consequence of

which has been a complete demoralisation of the work force. I have visited the factory about every six months during the last 20 years, and I have watched demoralisation creeping like gangrene through that factory. I was there in April, and the factory was a travesty of what it used to be when I was first elected to this House.

Mr. Bob Cryer: I should like to tell my hon. Friend that buses are urgently needed in my part of West Yorkshire. Seventy buses were ordered for 1979 and so far only 15 have been delivered. I am following my hon. Friend's splendid argument extremely well. I just wish that Park Royal could continue to turn out buses for West Yorkshire.

Mr. Pavitt: I echo my hon. Friend's request. That is the burden of my speech tonight.
What has happened with this uncertainty? The board first decided to transfer from Park Royal to the Southall factory. This threat was hanging over the Park Royal area from 1975, and it was only last October when this plan was reversed. How can one get confidence within a work force when for four years the whole situation has been that the bus building will move from Willesden to Southall and then one changes the plan and just a year ago closes Southall? Is it any wonder that there has been a lack of confidence in the work force? When I asked for a firm decision from the top man at that time, Mr. Alex Parks, I did not even get the courtesy of a reply.
There is no quicker way of slimming down the fat of the British Leyland empire than a recipe which meant that the work force could be made so discontented that conflict would be inevitable, and that the usual British Leyland alibi—labour troubles—could be made the scapegoat.
I started by mentioning Nero, but I think that probably Machiavelli would be the more appropriate historical candidate for the analogy of what has happened in regard to my buses.
In the recent statement on 10 September about British Leyland, Sir Michael Edwardes said that although
on the commercial side, the AEC plant at Southall has now closed … today Leyland


Vehicles has announced the intention of closing Park Royal Vehicles, not as part of the current exercise, but simply because of the appalling lack of productivity. The plant has a three year order book for the new Titan double-deck bus, but is running at a loss because of lack of co-operation by the work force in respect of both productivity and recruitment.
But all factories have labour problems and all management must deal with man management. What has happened here is that since 1973 I have had a file of letters in my office at the House. Every time I have tried to get more chassis and more components, there has been the excuse "labour troubles", "difficulties". It has seemed to me that the Leyland management has reached out for this stereotyped answer with a certain amount of glee.
I have a marvellous factory in my area—Glacier Metals. It is perhaps one of the finest in the country for man management. Would that it were possible to get British Leyland's management into a seminar there to learn how to do its job. Perhaps Leyland managers could go there and learn some of the ABC of labour relations, because they certainly seem to have missed that in their original training.
We should bear in mind that this factory was established in the 1920s. It was originally AEC, under Lord Black. It then became the Leyland Motor Corporation. In 1966, 1967 and 1968 there were changes in management and mergers. By 1975 the Government had to step in in order to rescue this disastrous failure of capitalism.
Since July 1975, when the Government bailed out this company by buying the equity for £46·49 million, the taxpayer has contributed a total of £1,021 million plus other financial assistance in order to buttress up inefficient management.
At Park Royal the management has been absolutely chaotic. Previously, for most of the time I have been a Member of this House, the manager was a Mr. J. W. Shirley. He was there from 1953 to 1976. He was succeeded by a Mr. Field, who was there from 1976 to 1978. Under their regime, they knew what they were talking about. They were experts and they were well versed in the whole question of bus building. They had the confidence of the work force. Since then, what an article in The Guardian of 24

September indicts as top heavy management has led to the contempt of the work force. I quote from the article:
At the root of the contempt is a mythical character called Hurry-up Harry. He is the archetypal Leyland career man who comes down from the Midlands with his well-researched theories and his expertise and runs into distrust from the shop floor every time he opens his mouth. 'All our management are British Leyland whizz kids,' said that worker. 'They call them expediters … They make up the titles as they go along. There are that many of them you have to make two buses a week to pay for them.'".
I have two charts showing the management structure as it was before Leyland started the reorganisation, when the top brass could be counted on the fingers of my hand. There is now a chart that makes the family tree of Henry VIII appear a minor matter. It starts with the top echelons and goes down through shade after shade of various assistant managers. As has been said before in the House, there are far more chiefs than Indians.
I was approached by shop convener Harry Bailey and manager Shirley in 1974 when the company had made the decision to expand and produce 15 buses a week. I was able to get from the then Minister an industrial development certificate within three weeks. I wrote to the Brent council on 14 June 1974 asking for priority for planning permission. The company changed its mind. It did not even apply for planning permission and never used the IDC granted by the Ministry, and the company must have decided to scrap this proposal. That was in 1974, and it is no wonder that there have been five years of uncertainty.
As long ago as 21 January 1975 I met union representatives upstairs in this House. I learned then—and I quote again:
Our labour force has been reduced over the last two years from 600-plus to 483, so it is obvious, in order to achieve maximum output, the labour force will require to be built up.
How can this be done when it must be recognised a number of our members over the past two years have left because of the uncertainty of the industry?
That was five years ago, and we were 193 buses short of the programme at the end of 1974.
The main reason for this shortfall was—chassis shortage—uncertain delivery—material shortage—glass, pop rivets metal threads etc. apart from electrical equipment.


The above shortages are the direct responsibility of Leyland management.
The representation of that time went on to say:
You should also understand the problems our members are encountering once the vehicles are delivered … the servicing and maintenance. If we take London Transport and pick out a few items which result in buses being off the road, apparently we are facing shortages in the garages on at least 80 mechanical items, urgently needed, complete holdup, no substitutes possible.
The two examples given below do not show the total buses off service … 90 DM buses and 40 DMS buses.
There follows a schedule of parts where 15 important items are subject to delivery delays from eight to 50 weeks.
In my area we have two other coachbuilding firms—Rolls-Royce and Mulliner Park Ward. In the malaise and uncertainty, these powerful magnets have drained more than 200 skilled workers from Park Royal.
What a paradox. Here is a plant that is profitable and viable, and British Leyland has neither the will nor the managerial ability to make a go of it. Here is an export winner Only recently Park Royal sent 400 buses to Baghdad. Urban congestion throughout the world from the Argentine to Zambia means that double-decker buses are one of the largest export potentials for the next 50 years, yet the whole factory here is to be closed by June 1980.
Once the closure and golden handshakes were agreed, production went up from two to five buses a week. That increase is only temporary, because skilled toolmakers have been diverted and heavy overtime worked. Before the decision to close, the average paypacket was £80 a week. It is now £100. Management should have taken that sort of action to save the factory and not close it.
What are the alternatives? London Transport needs buses. The present order will be only half the requirement, and that will be completed in June 1980. British Leyland has turned down a contract for a further 250 buses and it is possible that the rival firm of MetroCammell-Weyman will bridge the gap, but what will happen about the remainder? Shall we see West German buses in the streets of London, in contrast to the famous 1914 General

Omnibuses, which took the Old Contemptibles to the Battle of Mons? What kind of initiative and effort is this Government making to capture the export market? This is an export winner, which suddenly is being turned down out of hand.
I plead with the Greater London Council—the only hope—to come forward with a firm decision that London buses should be built in London and nowhere else. London Transport should accept the suggestions being put forward by Councillor Norman Howard, who pleaded with London Transport to have a feasibility study in order to keep this factory open. Secondly, he urged that it should use Park Royal to build the new type of bus that London Transport wants, either the B15, which is the "Titan" or the B45, or the alternative, XLM.
The first thing that London Transport should do is to integrate the production of buses at Park Royal with the maintenance work that London Transport needs and employs at present at Chiswick.
I have already written to the Chairman of the Public Accounts Committee asking for a thorough investigation, because I believe that this closure is such a scandal. It is a matter that is immediate and urgent and in this respect I have had support from my hon. Friend the Member for Newham, South (Mr. Spearing), who knows something about this area, because he once represented it in this House. The Public Accounts Committee should have one of its most thoroughgoing investigations to find how it is that this marvellous company, which has been the pride of my constituency for decades, is going out of existence.
I should be grateful if the Minister who is replying to the debate will use his influence with the Government to lend their support to saving the livelihoods of the families in my area, who will be thrown on the dole because of what I deem to be gross mismanagement over a long period of years. Had this been avoided it would have benefited not only my area, which suffers from inner city problems, but the country as a whole.

10.17 p.m.

The Under-Secretary of State for Industry (Mr. Michael Marshall): The House is indebted to the hon. Member for Brent, South (Mr. Pavitt) for raising


a number of important issues. The House is aware of the hon. Member's wide experience, it respects his views and understands why he wishes to draw attention to the problems within his constituency arising from the proposed closure of Park Royal.
I want to make clear to the hon. Member that, in taking the view that I do, I do not wish to appear disrespectful or in any way unwilling to help. If I could help him I would like to do so. However, the matter which we are debating is one in which the Government have no locus for action, although it is certainly one on which I would express a view.
Secondly, British Leyland's decision to close Park Royal must be looked at quite apart from the survival plan, which we are all anxiously studying at present. This problem pre-dates that survival plan. I do not intend tonight to go into any of the wider questions of British Leyland. I shall address my mind to the particular problems that were highlighted by the hon. Member's speech.
Although the Government must stand back on this matter, they are following the precedent of the previous Administration in saying that the future of British Leyland is something that must be worked out essentially by BL and the trade unions. Just as the previous Government felt unable to intervene in the Speke closure, so we must take the same view on this occasion. However, we can look at the problems at Park Royal and the lessons that are to be learnt. The hon. Member has performed a service in highlighting these tonight. In terms of the sheer approval or disapproval of this decision, the BL board neither sought our approval or advice on this closure nor would it have been appropriate for it to have done so. Therefore there is no scope for us to do anything to reverse the decision or to encourage the company to reverse it.
I say that the issue is serious because no company, least of all BL, can sustain repetitions of the story that we have heard tonight. The hon Member put his own interpretation on the story. I do not wish to express my view of where the blame may lie. However, I agree with the hon. Member that the story basically amounts to one of self-destruction.
The hon. Member said that after a period of uncertainty the introduction of the Titan presented a great opportunity for Park Royal. He argued strongly that it was nonsense for a firm to close when it has a full order book. I agree.
Park Royal has much in its favour. It has a long tradition which stretches back for 50 years. It has an unrivalled experience of bus manufacture. It has major capital investment in a new product. The Titan is a first-class example of modern technology. Customers are queueing up for the product.
When we examine the problems facing the country, it is fair to say that Park Royal has many things in its favour which other manufacturers would envy. But they are being thrown away because—and here I come to the nub of the argument as I see it—no customer is content to see deliveries lag further and further behind. No company can continue to bear great losses.
The hon. Member spoke of profitable operations. He is aware that Park Royal has been losing money at the rate of £250,000 a month. Its estimated annual loss has been £3 million. I do not seek to apportion blame, but certain facts speak for themselves. The hon. Member quoted Sir Michael Edwardes' views on productivity, but he did not extend the management's arguments about the difficulties of additional recruitment. He described the problems which arose through the loss of skilled labour. He would have given a more balanced picture if he had described the problems involved in the inability to reach agreement on bringing in other skills and other forms of labour which could have been trained to help overcome some of the productivity problems.
The hon. Member said that productivity improved when closure was in sight. He will recall that productivity was greater in the past and that there has been a decline.
The difficulties in recruitment have also played their part in the problems. Production could have been higher, because the target of seven buses a month was reckoned to be modest. A higher rate of output was sought for the long term.
In such a position, BL had to face the realities. Ample productive capacity


is available, and therefore the hon. Member should not be surprised if BL feels that it must cut its losses as efficiently as possible with as little further damage to customer confidence as possible.

Mr. Nigel Spearing: Irrespective of the merits of the closure of Park Royal, does the Minister agree that there is some obligation on both the firm and the nation in respect of the Titan bus on which £13 million of public money has been spent? Since there is further capacity in the company, do not the Government have further responsibility?

Mr. Marshall: I shall come to that in a moment.
Opposition Members often refer to job losses and suggest that they stem from Government policy. Park Royal provides a clear illustration of how the real threat to jobs comes not from Government but from a failure to come to grips with commonsense realities. I understand that there are fairly generous redundancy payments. I also understand some of the personal problems that will arise.
To take the point that has just been raised, there is additional capacity within British Leyland with which to continue the production of the Titan bus. I have been assured of that. To put the matter in its correct perspective, there may be a slight hiccup in terms of phasing in and out but British Leyland intends that the Titan bus shall be continued. The hon. Member for Newham, South (Mr. Spearing) was right to draw the attention of the House to the wish to see a return on taxpayers' money. The taxpayer is entitled to be fairly angry about the saga that I have described tonight.
I shall not leave the subject without reverting to the human problems that arise. All hon. Members will understand the feeling in the constituency of the hon. Member for Brent, South particularly with such a record of employment there. Whatever the redundancy payments and the opportunities for skilled labour—I believe that the hon. Gentleman's constituency is more fortunate than some—one-off payments cannot compensate for the permanent loss of jobs by some employees. Some employees will not be redeployed and there will be no compensation

for the loss of opportunities for school leavers to take up apprenticeships in manufacturing, particularly in the bus industry.
Will the traders and their employees in the area be compensated? For, however marginally, they are dependent upon Park Royal. Such consequences have to be accepted from time to time. However, I agree with the hon. Gentleman that at Park Royal all that was unnecessary. That is the nonsence of the story, and that is why I believe the taxpayer has a right to be angry.
Turning from the dismal and closed chapter of Park Royal, the future of the Titan bus is good. Let me make clear to the House that the Government, on the advice of British Leyland, have good hopes for its future. The plans, which have been mentioned, for the relocation of Titan are in hand. It is expected that the interruption in production will not be major. In addition, other British manufacturers are interested in the matter. I do not wish to pour too much cold water on the hon. Gentleman's purple passages, but I believe that he should recognise that there is no reason why British manufacturers cannot continue to compete to hold the domestic market. I do not see the sort of bogy that he raised of our friends across the Channel stepping in automatically. The competitive aspect should sharpen our minds. Had there not been a competitive market here and an alternative capacity the hon. Gentleman's point would have been even more poignant than it is tonight.
If a fine product were discontinued simply because of one plant's inability to meet production targets and to operate at profit, that would be wrong. I hope that lessons can be learnt from the Park Royal story. The future of any company lies in co-operation to beat competitors without. The lesson that we should learn is that internal dissension can serve only the purposes of competitors. Those competitors sometimes include those who want to win the jobs of the work force, as well as the company's profits. We have also learnt that it is reasonable for the management and the work force to argue over increased levels of remuneration, the precise basis of negotiating for skilled employment and so on, when profits have been made. However, to carry on the


sort of long-running saga that we have seen in recent months at the expense of the livelihood of the work force is a tragedy. Although the work can be put elsewhere and the future of the Titan bus is assured, we in this House should do

all we can to draw the obvious moral from the story and look to the future prosperity of BL as a whole.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.